The excise tax is a tax imposed under Section 4980D of the Internal Revenue Code. It applies to any failure by an employer-sponsored group health plan to comply with an array of specific coverage mandates and prohibitions. (For example, maximum waiting period, maximum out-of-pocket expense limits for covered participants, mandatory and free provision of contraceptive devices, etc.). If the deficiency in the employer’s plan persists for an entire year, the price tag would be $36,500 per affected individual.
Example: In a much-publicized recent case, Hobby Lobby agreed to provide its employees with 16 of the 20 forms of contraceptives required by the government, but objected to four forms of contraceptives for religious reasons. This is enough to trigger the excise tax of $100 per day. Multiplied by the 13,000 individuals insured under the Hobby Lobby plan, the excise tax would amount to $1.3 million per day, or nearly $475 million per year. To put this into perspective, if Hobby Lobby were simply to drop its health insurance coverage altogether, it would be subject to “only” a $26 million annual penalty under the “pay or play” rules beginning in 2015.
Who is subject to the excise tax?
The excise tax applies to any employer – regardless of its size – that sponsors a group health plan that fails to satisfy one or more of the coverage requirements/restrictions set forth in the accompanying chart.
Exemptions from This Tax?
Conveniently for governmental bureaucrats, plans sponsored by the federal government are fully exempted from this tax.
Can an employer avoid the excise tax by offering one plan that complies with all mandates and another bare-bones plan that doesn’t?
No. The mandates that trigger the excise tax are imposed on each plan individually, so every group health plan offered by an employer must satisfy the mandates on its own. This excise tax is different than the Affordable Care Act’s employer “pay or play” mandate. Under Pay or Play, an employer can offer multiple plans, some of which may not be “affordable” or provide “minimum value.” An employer with at least 50 full-time employees can escape any penalties, however, so long as it makes available to such full-time employees at least one plan that is “affordable” and provides “minimum value.”
Full legislative alert here from the Hinkle Law Firm.
