Skip to main content

Important Change Regarding health Plan Opt-Out Payments and ACA Affordability

Federal regulators recently announced an important change regarding employer payments to employees who opt-out of, or otherwise decline, coverage through an employer-sponsored group health plan.


To whom does this guidance apply?  

This guidance applies to plans that must comply with the employer mandate rules with their first plan year in 2015.


How does the guidance apply? 

Opt-out payments must count towards the overall employee cost of coverage for the purposes of determining affordability of coverage under the ACA employer mandate rules. Plans must factor in any opt-out payments they offer when determining the affordability of their coverage. For example:

If an employee's total cost to participate in the plan is $100 per month and the employer also offers $50 a month to employees who waive coverage, the true cost of coverage to a covered employee is $150 per month for purposes of determining affordability.


Does this guidance impact employees who receive a higher salary in lieu of coverage? 

This guidance will also impact employers who have a no benefits employment category.* These arrangements—and arrangements where government contractor employees are paid their "fringe rate" in cash—are particularly impacted by the new regulations.


*A "no benefits" category is one where the primary distinction between an employee in one class of employees (a "benefits" category) and another (the employer's standard employment category) is that the latter gets more salary and no benefits and the former gets less salary but also receives benefits, all other aspects of employment being equal.


Do you have questions?  Please contact your client relationship manager.


This alert is being provided as an informational tool. It is recommended that plans consult with their own experts or counsel to review all applicable federal and state legal requirements that may apply to their group health plan. By providing this publication and any attachments, Meritain Health is not exercising discretionary authority over the plan and is not assuming a plan fiduciary role, nor is Meritain Health providing legal advice.