Letter 226-J is a notice issued by the IRS to inform an employer that they may be liable for

an Employer Shared Responsibility Payment (ESRP) under the Affordable Care Act (ACA). The ESRP is a penalty imposed on applicable large employers (ALEs) who fail to offer affordable health coverage to their full-time employees and dependents, or if the offered coverage does not meet minimum value standards. The ESRP may be triggered by at least one employee receiving a premium tax credit through a state or Federal insurance exchange.

When you receive Letter 226-J, it is crucial to read and understand its contents thoroughly. The letter includes:

1. A short explanation of the ESRP and the reason(s) for the proposed penalty.
2. The penalty amount for the tax year in question.
3. A list of employees who received premium tax credits, which triggered the penalty.
4. Instructions on how to respond to the letter.
5. Forms and documentation to review and complete.

Steps to Take After Receiving Letter 226-J

1. Don’t panic: Remember, receiving Letter 226-J does not mean you are automatically liable for the penalty; it is an initial assessment, and you have the opportunity to respond.
2. Review the information: Carefully review the employee list and the penalty calculation. Ensure that your records match the information provided by the IRS. If you find any discrepancies, document them with supporting evidence.
3. Consult with professionals: Reach out to your tax advisor, human resources department, or legal counsel for guidance. They can help you understand the implications of the letter and ensure you respond appropriately.
4. Prepare your response: You have a limited time to respond. Complete the forms provided, including Form 14764 (ESRP Response) and Form 14765 (Employee Premium Tax Credit Listing). If you disagree with the proposed penalty, provide a detailed explanation and any supporting documentation.
5. Submit your response: Send your response to the IRS by the specified deadline. Consider sending your response via certified mail, ensuring you have proof of mailing and delivery.
6. Await the IRS’s reply: After submitting your response, the IRS will review your submission and respond with either Letter 227, which outlines the next steps, or a revised Letter 226-J. The process may take several months, so be prepared to wait.
7. Pay or appeal: If the IRS agrees with your response, you may not be liable for any penalties. However, if the IRS disagrees or you still believe the penalty is incorrect, you can request a pre-assessment conference with the IRS Office of Appeals. If you ultimately owe the ESRP, be prepared to pay the penalty to avoid additional interest and penalties.

Receiving Letter 226-J from the IRS can be intimidating, but with a clear understanding of the letter’s purpose and the appropriate steps to take, you can navigate the situation effectively. Remember to stay organized, consult with professionals, and respond promptly to ensure the best possible outcome.

This information is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2023 Angus McRae Insurance Brokerage Services, Inc. All rights reserved.

The 2023 ACA Affordability Percentage

The ACA affordability percentage is an essential factor in determining whether an employer’s health insurance plan is considered “affordable” under the ACA’s employer mandate. For 2023, the Internal Revenue Service (IRS) has set the affordability percentage at 9.12%. This percentage is a slight increase from 9.61% in 2022.

To determine whether an employer’s health insurance plan is affordable, the employee’s share of the premium for the lowest-cost, single-only plan offered by the employer should not exceed 9.12% of their household income. Employers can use one of the three safe harbors provided by the IRS to determine affordability: the employee’s W-2 wages, the employee’s rate of pay, or the federal poverty level (FPL).

Consequences for Employers

Employers who fail to offer affordable health insurance plans to their employees face potential consequences under the ACA’s employer mandate. These consequences come in the form of Employer Shared Responsibility Payment (ESRP) penalties, which vary depending on the specific circumstances.

• The “No Coverage” Penalty. In general, if an employer with at least 50 full-time equivalent employees (FTEs) does not offer minimum essential coverage to at least 95% of its full-time employees and their dependents, and at least one employee receives a premium tax credit to purchase coverage through a health insurance marketplace, such as healthcare.gov, the employer will be subject to the “no coverage” penalty. For 2023, the no coverage penalty is calculated as $2,880 per full-time employee, excluding the first 30 employees. This amount is adjusted annually for inflation.

• The “Unaffordable Coverage” Penalty. If an employer offers coverage but fails to meet the affordability threshold, they may be subject to the “unaffordable coverage” penalty. This penalty is triggered when at least one employee receives a premium tax credit to purchase coverage due to the employer’s unaffordable coverage. For 2023, the unaffordable coverage penalty is $4,320 per employee receiving a premium tax credit. This amount is also adjusted annually for inflation.

Complying with the ACA affordability requirements is crucial for employers to avoid costly penalties. By understanding the 2023 ACA affordability percentage and ensuring their health insurance plans meet these guidelines, employers can protect their businesses from financial risks while contributing to a healthier workforce. Employers are encouraged to review their current health insurance offerings, communicate with employees about their options, and seek professional guidance when necessary to ensure they remain compliant with the ACA’s affordability standards.

This information is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2023 Angus McRae Insurance Brokerage Services, Inc. All rights reserved.

Humana has long been a major player in the group health insurance market, providing coverage for millions of Americans through employer-sponsored plans. The company’s decision to exit the market has been attributed to various factors, including increased competition, regulatory pressures, and the desire to focus on its core businesses, such as individual and Medicare Advantage plans.

The company has assured its customers that they will not be left without coverage, as existing policies will continue to be honored until their expiration. However, after a certain date, Humana will not be renewing these plans or offering new group policies.

When will Humana small group medical insurance plans end in Georgia? For existing Georgia policyholders, the exact date when group Humana medical insurance will end depends on the specific policy. We anticipate Humana to issue renewal offers for existing Georgia employer groups with renewal dates prior to December 1, 2023. Employers with renew dates of December 1, 2023 and later will need to secure new coverage with a different insurance provider.

It is crucial for employers to begin researching alternative options and providers as soon as possible to ensure a smooth transition for their employees.

Next Steps for Employers and Employees. If you are an employer currently offering Humana group medical insurance, it is important to begin exploring alternative insurance providers to avoid gaps in coverage for your employees. Our Atlanta-based insurance agency stands ready to help you through this process.

Humana’s exit from the group medical insurance market has left many Georgia policyholders seeking answers about the future of their healthcare coverage. While the specific end date for your coverage depends on your plan, employers and employees should begin preparing for this transition as soon as possible. By staying informed and proactive, both employers and employees can ensure a smooth transition to new group health insurance providers, maintaining continuity of coverage and care.

This information is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2023 Angus McRae Insurance Brokerage Services, Inc. All rights reserved.

The Internal Revenue Service (IRS) reviews and adjusts the FSA limits annually based on inflation and other economic factors. For 2023, the FSA contribution limits are as follows:

Health Care FSA. For the 2023 plan year, the Health Care FSA contribution limit has been increased to $3,050 per employee. This is a $200 increase from the 2022 limit of $2,850. Employees can use these funds to cover various qualified medical, dental, and vision care expenses that are not covered by their insurance plans. Some examples of eligible expenses include copayments, prescription medications, and certain over-the-counter medical supplies.

Dependent Care FSA. The Dependent Care FSA contribution limit for 2023 remains unchanged at $5,000 per year for individuals or married couples filing jointly, and $2,500 for those who are married but filing separately. These funds can be used to pay for eligible dependent care expenses, such as childcare for children under 13, care for disabled dependents, or elder care for qualifying individuals.

Carryover and Grace Period Provisions. Employers have the option to offer either a carryover provision or a grace period for Health Care FSAs, but not both. The carryover provision allows employees to carry over up to $610 of unused FSA funds from the previous plan year into the new plan year. The grace period provides employees with an additional 2.5 months after the end of the plan year to incur and submit eligible expenses using the remaining FSA balance. For Dependent Care FSAs, there is no carryover provision. However, employers may choose to offer a grace period of up to 2.5 months following the end of the plan year for employees to incur eligible dependent care expenses.

As we move into 2023, it’s crucial for both employers and employees to be aware of the updated FSA limits and plan accordingly. Health Care FSA limits have increased slightly, offering more pre-tax savings for eligible medical expenses. By staying informed about these changes and managing FSA contributions effectively, employees can maximize their tax savings and ensure they have the necessary funds to cover eligible health and dependent care expenses throughout the year.

This information is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2023 Angus McRae Insurance Brokerage Services, Inc. All rights reserved.

2023 HSA Contribution Limits. Each year, the IRS adjusts HSA contribution limits to account for inflation and other economic factors. For 2023, the HSA contribution limits are as follows:

1. Individual coverage: $3,850 (an increase of $200 from 2022)
2. Family coverage: $7,750 (an increase of $450 from 2022)

These limits apply to the total amount of contributions made by both the account holder and the employer, if applicable. It is important to keep in mind that any contributions exceeding these limits may be subject to income tax and an excise tax.

2023 HSA Catch-Up Contributions. Individuals aged 55 or older are allowed to make additional “catch-up” contributions to their HSAs. In 2023, the catch-up contribution limit remains unchanged at $1,000. This means that an individual aged 55 or older can contribute up to $4,850 for individual coverage or $8,750 for family coverage, including the catch-up contribution.

High-Deductible Health Plan (HDHP) Requirements. To qualify for an HSA, an individual must be enrolled in a high-deductible health plan (HDHP). IRS rules define the minimum deductible amounts and maximum out-of-pocket limits that a health insurance plan must have to qualify as an HDHP, thus allowing the policyholder to open and contribute to an HSA.

The 2023 HSA limits provide individuals and families with the opportunity to save more for their healthcare expenses while taking advantage of the tax benefits associated with these accounts. By understanding these updated limits and how they may impact your personal financial situation, you can make informed decisions about your healthcare and tax planning strategies.

This information is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2023 Angus McRae Insurance Brokerage Services, Inc. All rights reserved.

Affordable Care Act plans. These are plans for fully-insured small group (less than 50 employees) sold after January 1, 2014 (when the ACA went into effect). We haven’t yet seen these renewal letters.

Large group health plans. These are plans for fully-insured groups with 51 or more employees. For this sized group the insurer can use the health of plan participants when calculating premium rates. Thus, the rate increase is very, very dependent on the group’s claims experience and any on-going medical conditions. For this category, we have seen rate decreases (minus 6%), small increases (5% for example), and large increases (as high as 60%). Situations like this really call for the expertise of an experienced health insurance broker in Atlanta.

Self-funded group plans. Small group self-funded plans are a product category that was designed to avoid the onerous community rating rules of the Affordable Care Act. Premium increases for these plans are also very dependent on the health of the plan participants. We expect to see more renewals in the next week or so for this category.

The bottom line is that it pays to have an insurance broker on your side. Someone whose personal income is dependent on you being happy. Please contact an Angus McRae benefits consultant for assistance. We would be happy to lend a hand.

Why does a group get a large premium increase? Most of the time it is because of changes in demographic information (they have hired older workers and/or terminated younger workers. Under the Affordable Care Act, premiums are based largely on the age of the insured individuals – and the pooled claims of that insurer’s small group ACA block of business.

Another reason for a large medical rate increase is high claims experience in a self-funded (level-funded) medical plan. These plans are not subject to the community rating provisions of the ACA. Thus, they may be a bit more volitile when it comes to claims experience.

No matter the reason, years of experience allows us to help our group medical clients. It is our chosen line of work and we enjoy helping our wonderful clients.

For the small group health insurance market we are expecting moderate rate increases. This will be very dependent on the type of coverage. The rate of increase for community rated Affordable Care Act plans will be higher as healthy groups leave that platform and migrate towards less expensive self-funded ERISA plans. These plans are sometimes called “level-funded plans.” The rate changes for self-funded plans will be very dependent on the claims history of the particular employer client. Thus, rate changes for these self-funded plans can be more volatile.

As a health insurance broker in Atlanta, our job is to find the best combination of premium rates, employee benefits and doctor / hospital access for our clients. Employers who just sit back year after year and not shop their plan may be missing out on significant premium savings.

Give us a call if you are looking for a fresh set of eyes to evaluate your employee benefits plan.

Thus, during the late summer months our health insurance agency is busy preparing census information necessary to shop with each insurance company. We are also busy trying to clear our deck of administrative types of things so that when the fourth quarter hits we are not distracted with other tasks.

The summer of 2020 has been like none other – in many respects. It’s hard to believe, but I’m looking forward to our coming busy season.

On April 1, 2020, Blue Shield announced it will waive co-payments, coinsurance, and deductibles for treatment for COVID-19 received between March 1, 2020 and May 31, 2020. This waiver was previously extended to September 30, 2020. Today, we are extending this waiver through December 31, 2020. This applies to the following plan types:

• Fully insured and flex-funded employer-sponsored plans
• Plans purchased through Blue Shield of California directly
• Plans purchased through Covered California
• Medicare Advantage plans
• Medicare Supplement plans
• Employer-sponsored plans where the plan sponsor elects to pay for copays, coinsurance, and deductibles for COVID-19 treatment. These plans are not required to cover these costs. Employer groups with questions on this topic should contact their account team.

Medi-Cal members have no out-of-pocket costs for treatments. Covered services include any treatments for COVID-19 from doctors, hospitals, and other healthcare professionals in a plan’s network from March 1, 2020 through December 31, 2020. Providers must use proper diagnosis and procedure codes related to COVID-19 for Blue Shield to waive member deductible, copay, and coinsurance liability for treatment.

Please note: COVID-19 guidance is evolving rapidly. Our responses are based on existing guidance and are subject to change depending on legal and/or regulatory developments. Please contact your Angus McRae benefits consultant if you have questions on how your plan handles Covid testing and claims.