Since Congress zeroed out the ACA’s individual mandate penalty as part of last year’s tax bill, state lawmakers have begun to consider enacting their own individual coverage mandates in an effort to stabilize the individual market. Two states – New Jersey and Vermont – have enacted mandates so far this year. Massachusetts has had an individual mandate in place since 2007.
These state mandates create potential headaches for employers. Although, the federal mandate will carry no penalties starting next year, employer reporting and disclosure requirements remain in place. Employers with workers in states imposing an individual mandate face dual reporting – at the state and federal level – and may need to distribute double the number of individual tax notices on health coverage. Additionally, states may set standards for minimum essential coverage (MEC) that differ from the federal definition. This disparity already applies in Massachusetts, and while New Jersey and Vermont don’t diverge from the federal definition, other states may, as more consider if and how to replace the federal requirement.
If you have employees in Massachusetts, New Jersey and Vermont keep reading for a short summary of the mandates. Others will want to keep an eye out for legislative proposals in your state. If you find the proposals burdensome, consider providing feedback to your state lawmakers.
Massachusetts. Many multi-state employers are familiar with the Massachusetts individual mandate. Residents must maintain minimum creditable coverage (MCC) or face a tax penalty. Employers must report annually to the state’s Department of Revenue if their plan covering Massachusetts residents meets MCC standards, and individual notices must go to covered employees. MCC standards generally exceed the ACA’s requirements for MEC and don’t take into account grandfathered status. Affordability is determined annually based on income level and premium costs of available coverage.
New Jersey. The New Jersey law replaces the federal penalty with a state tax calculated in a similar manner. The legislation adopts the ACA standard for MEC, but state regulators can add other forms of coverage to the list. Employers that provide MEC to New Jersey residents will have to report coverage information to the state treasurer, but submission of information similar to ACA-required employer reports will apparently satisfy the reporting obligation to the state. They will also have to issue coverage notices to individual taxpayers. Affordability determinations and tax calculations will use ACA's income thresholds but replace the national average premium for a bronze-level plan with New Jersey's average premium for bronze-level plans to determine the amount of the tax.
Vermont. A new law will impose an individual health coverage mandate on Vermont residents beginning Jan. 1, 2020. Details on administration and enforcement – including any employer reporting obligations – will be considered by lawmakers in 2019 based on recommendations by a working group of regulators and stakeholders and assisted by various state agencies.