September 04, 2019
On June 28, 2019, Gov. Newsom signed SB 78 into law, establishing a state individual mandate, effective January 1, 2020. This state-based individual mandate will require California residents to maintain minimum essential coverage or pay a penalty, beginning in 2020. In an effort to address health insurance affordability issues, the law also offers subsidies to individuals and families with income between 400% and 600% of the federal poverty level. Currently, only individuals and families with income between 100% and 400% are eligible for federal government subsidies for purchasing health insurance through Healthcare.gov or a state-exchange.
It is important to remember that large employers who are subject to the employer mandate are at risk for a penalty if a full-time employee purchases an individual policy through the exchange and receives a premium tax credit from the federal government to subsidize their premiums. If an employee receives premium assistance through the state of California because their income is between 400% and 600% of the federal poverty level, this should not trigger a penalty for the employer.
This new mandate was enacted in response to the effective elimination of the federal individual mandate penalty under the ACA. The ACA’s individual mandate penalty was reduced to zero under the Tax Cuts and Jobs Act, beginning in 2019.
Insurers and self-insured employers will need to report coverage information to the California Franchise Tax Board beginning in January 2021 for coverage year 2020. The law states that it will be the same information that is required on Form 1095-C. So, it may be possible that the forms will be submitted to California as well as the IRS. This will be determined in future regulations.
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