In response to the 2017 Tax Cuts and Jobs Act, which eliminated the federal individual mandate penalty the California Assembly passed a bill to create a statewide individual mandate instead. AB 414 was passed to establish the California Health Care Coverage Shared Responsibility Act which will require all California residents to purchase health insurance for themselves and their dependents to maintain minimum essential coverage (MEC).
The bill was passed by the Assembly floor with a 55-18 vote. It now heads to the Senate for consideration, and if passed as is, it would likely go into effect after 2019. Details and requirements of the bill, once passed, are as follows:
- Effective January 1, 2020, California residents will be required to purchase and maintain health insurance for themselves, their spouses and dependents.
- California will offer premium tax credits to residents who earn less than 600% of the federal poverty level to subsidize their health care premiums.
- Californians who do not maintain health insurance coverage will be subject to a penalty, which will be equal to 2.5% of salary or $695 per adult and $347.50 per child up to a max of $2,085 per family.
- Collected penalty funds would go toward a “Health Care Coverage Penalty Fund” created by the bill. Money in the fund would be used “to improve the affordability of healthcare coverage for Californians.”
Employers will also have requirements, similar to the federal mandate that was previously in place, California employers will need to document that their employees had minimum essential coverage beginning in 2020. The bill is not clear in a few areas, namely whether or not the state-level expansion of premium tax credits to will impact employers that do not offer minimum value or affordable coverage to their full-time employees. Additional guidance from lawmakers is necessary in order to clarify what type of impact, if any, the proposed new law will have on employers that do business in California.
Partnering with a Professional Employer Organization (PEO) is one way for California business owners to relieve themselves of the burden of mandated reporting while remaining compliant with new and changing state laws. A PEO package like Emplicity’s PrimeHR™, relieves you of confusing administration tasks and allows you the peace of mind to focus on growing your business and bottom line.
Since 1995, Emplicity has provided a smarter, more secure, and integrated platform of employer services to its 300 business clients and their 8,500 employees. As a Professional Employer Organization, or PEO, the California-based HR outsourcing firm simplifies the compliance, administration, and support businesses need in the areas of employee benefits, payroll, and human resources technology.
NOTICE: Emplicity provides HR advice and recommendations. Information provided by Emplicity is not intended as a substitute for employment law counsel. At no time will Emplicity have the authority or right to make decisions on behalf of its clients.