If you are a big applicable employer (FTA), then you are already aware of 
Employer Shared Responsibility (ESR) costs, more commonly known under the term of the employer. What you may not be aware of is that the penalties for not offering coverage, or do not offer affordable coverage, are adjusted annually based on the percentage of premium adjustment. This blog will cover what percentage of premium adjustment is, and its impact on your cost of ESR, if you need to pay.
What percentage of premium adjustment?
In short, the premium adjustment percentage is used to increase the amount of the tax ESR compared to the rising prices of different health insurance premiums due to inflation. While inflation United States (slowly) increasing the cost of insurance premiums, the percentage of premium adjustment will be to keep the price of the corresponding high ESR sentence.
To quote the language of the Department of Health and Human Services, "the percentage of the premium adjustment is the percentage of the average premium per capita for health insurance coverage in the United States exceeds the average premium per capita in 2013. "
what is it used?
the percentage of premium adjustment is used for the calculation of ESR tax. it is used to fix the rate of increase of the three parameters detailed in the affordable care Act:
- the limits of deductible and OOP max for small groups and individual plans
- to determine exemptions difficulties of individual mandate
- the amount of penalty ESR
While the first two items above are supported by the government and insurance companies, you and your tax professional will want to be aware of how to settle the employer's responsibility shared payments that you will be responsible. You can find the percentage of premium adjustment in the notice HHS benefits and payment settings, which is close in late February each year.
To calculate the appropriate penalty, you multiply the base sentence (or $ 00 or $ 3000 for the year) by the percentage of premium adjustment and rounding to minimum $ 10 the closest. For example, the percentage of premium adjustment for 2016 was 8.3%, which would lead either to a penalty of $ 2,0 for not offer coverage, or a $ 3,240 penalty for any employee whose the coverage you offer are not affordable.
Conclusion
This is just one of the many moving parts of the Affordable Care Act that you and your business consultants needed to follow. If you are a large employer who applies will make a payment to the employer's responsibility to share, make sure you include the percentage adjustment premium when calculating your costs.
What questions do you have about the percentage of premium adjustment and how it affects the trouble ESR? Let us know in the comments below.
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