Part of Our Series on the Tax Cuts and Jobs Act of 2017
Starting January 1, 2019, the Tax Cuts and Jobs Act of 2017 (the “Act”) permanently repeals the Affordable Care Act’s tax penalty on individuals who fail to purchase minimum essential health coverage. Accordingly, any individual who is not covered by a health plan that provides at least minimum essential coverage for any month beginning after 2018 will not be required to pay a shared responsibility payment on their federal tax return.
- The repeal does not affect the “employer mandate” which requires larger employers to offer affordable minimum essential coverage to full-time employees or potentially pay a tax penalty.
- It also does not repeal requirements for an employer to report to the IRS and to employees information related to the employer’s health plans (including employees who have been offered, or enrolled in, the health plans).
Possible Effects on Employers
The repeal of the individual mandate could affect employers in a few ways:
- The repeal reduces the incentive for individuals, particularly healthy individuals, to enroll in health coverage, including employer-sponsored coverage. Lower enrollment by healthy individuals could cause premiums for employer-sponsored plans to increase.
- The potential penalties imposed on an employer that fails to offer minimum essential coverage or offers minimum essential coverage that does not meet affordability or minimum value requirements are triggered only if one or more full-time employees purchase coverage on a health exchange with federal subsidies (g., premium tax credits). Eliminating the individual mandate is expected to cause fewer individuals to obtain subsidized coverage on a health exchange. This would allow employers to at least potentially pay lower penalties related to any violations of the employer mandate, and in some cases could allow employers to potentially avoid paying any such penalties.
- The IRS will no longer need to receive information necessary to enforce the individual mandate. Accordingly, the employer reporting requirements that are currently designed to help the IRS enforce the individual mandate may be reduced or repealed completely.