On June 27, 2019, Governor Newsome signed California S.B. 78 into law. The bill requires an individual to be enrolled in and maintain minimum essential health coverage under a health insurance plan for each month on and after January 1, 2020. If not, a tax penalty of $695 per adult and $347.50 per child, or 2.5% of annual household income (whichever is greater) is assessed on the individual for the applicable tax year. Read on to learn more about California S.B. 78!
Understanding Minimum Essential Coverage
As background, the Patient Protection and Affordable Care Act of 2010 (the “ACA”), is the federal law that established several healthcare coverage market reforms, including an individual mandate that requires an individual, including any of his/her dependents, to maintain minimum essential coverage or face a tax penalty. “Minimum essential coverage” is health insurance that is provided by an employer, the government, or purchased individually from an insurer.
While the ACA requirement to obtain and maintain health coverage is still law, the Tax Cuts and Jobs Act of 2017 reduced the individual tax penalty to zero. The new California S.B. 78 creates an individual mandate at the state level for California residents and adds the tax penalty back. S.B. 78 highlights the importance of maintaining health coverage, so that each California resident and their dependents continue health coverage, even though the federal ACA penalty was reduced to zero.
What does California S.B. 78 do?
California S.B. 78 provides healthcare financial assistance to California residents with household incomes at or below 600% of the federal poverty level, including advanced premium assistance subsidies. This healthcare coverage financial assistance is available until January 1, 2023. The bill also provides various subsidies and licensing regulations for healthcare facilities.
The bill authorizes a healthcare service plan or health insurer to cancel a contract or policy for nonpayment after a three month grace period, provided that the California resident receives the advance premium assistance subsidy or advance payments of the state premium tax credit.
What does California S.B. 78 mean for employers?
This state law does not create a new obligation for employers, since California S.B. 78 mirrors the ACA and it is an individual’s responsibility to obtain and maintain health coverage. However, this law creates a new state tax penalty for California residents if he or she does not enroll in and maintain healthcare coverage that provides minimum essential coverage.
Click here to learn more about CA S.B. 78.
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