Tobacco Surcharge (Group)

[MW Agent]

I wasn't sure whether to post this question in this section or employee benefits, but here it goes. With the ACA rules, a group carrier I work with splits their rates now as tobacco vs. non-tobacco. The employer would like to base his contributions as a % on the non-tobacco rates and make the tobacco users make up the difference. If the % is such that the tobacco users are still getting at least 50% employer paid coverage, does this work? Guessing not, but thought I would throw it out there.

 

[RayNY]

Does it work for what?

SHOP subsidy eligibility?
-Yes, it appears so, as long as the other requirements are met. 50% contribution on a compliant plan is only a piece of the puzzle.

Employer mandate penalty avoidance?
-Possibly, so long as employee contribution is less than 9.5% of MAGI household income for an individual policy on both products (smoker and non-smoker, but obviously, smoker rates on the lowest paid eligible employee is the safe harbor)

MEC/Affordable coverage?
-Yes, so long as the plan complies. I presume it does.

Just plan being allowed to do it?
-Yes, but you'll probably have to do a defined DOLLAR amount per tier (based on the percentage of non-smoker rate he wants to pay), not a flat percentage.
(EX: 50% contribution would mean 50% regardless of product or tier. $100/$170/$200/$285 contribution based on tier would allow a "lower percentage" of comp on smoker products, while keeping contributions consistent, and keeping the percentage the same regardless of tier.)

 

[MW Agent]

Does it work for what?

SHOP subsidy eligibility?
-Yes, it appears so, as long as the other requirements are met. 50% contribution on a compliant plan is only a piece of the puzzle.

Employer mandate penalty avoidance?
-Possibly, so long as employee contribution is less than 9.5% of MAGI household income for an individual policy on both products (smoker and non-smoker, but obviously, smoker rates on the lowest paid eligible employee is the safe harbor)

MEC/Affordable coverage?
-Yes, so long as the plan complies. I presume it does.

Just plan being allowed to do it?
-Yes, but you'll probably have to do a defined DOLLAR amount per tier (based on the percentage of non-smoker rate he wants to pay), not a flat percentage.
(EX: 50% contribution would mean 50% regardless of product or tier. $100/$170/$200/$285 contribution based on tier would allow a "lower percentage" of comp on smoker products, while keeping contributions consistent, and keeping the percentage the same regardless of tier.)

Got it, thank you for responding.