Important Considerations for Employees Before Deciding to Waive Coverage

Posted: August 2, 2017 by Paul Roberts

The Affordable Care Act (ACA) – still the law of the land as of August 1, 2017 – requires each American to have qualifying Minimum Essential Coverage (MEC) as part of the “Individual Shared Responsibility” mandate. (Click here for a list of “Questions and Answers on the Individual Shared Responsibility Provision” on the Internal Revenue Service website; it includes a summary of what counts as minimum essential coverage.)

If an individual does not have coverage meeting the MEC requirements, he or she must qualify for an exemption or pay a penalty when filing his or her federal income tax return for the year the individual did not have coverage. Individuals may, however, have a break in coverage of less than 90 days without incurring the penalty.

The penalty is calculated two different ways – as a percentage of household income, or by flat-fee amount(s) per person. The higher of the two penalties is assessed.

The MEC requirement applies to individuals of all ages, including children. An adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the penalty payment if the dependent does not have coverage or an exemption.


Waiver Considerations

If someone in one of your groups is considering waiving their employer-sponsored insurance due to costs, it’s important to keep the IRS penalties in mind.

A health insurance broker knows how critical it is to protect one’s own liability and peace-of-mind in relation to health care costs. It generally makes much more sense for employees to elect coverage than pay a penalty for nothing in return.



We’ve developed and recently updated a helpful form, Important Considerations for Employees Before Deciding to Waive Coverage. This piece is available in your choice of languages:

This document can be customized by the employer. It tells employees they have been made an offer of affordable coverage by their employer per the ACA’s Employer Mandate, making them ineligible for Advanced Premium Tax Credits (APTC) to help them pay for coverage on the Exchange. Many employees don’t realize this and elect to use an APTC to pay for coverage even if they are not eligible for it, which must later be paid back to the IRS in full.

The latest versions of each form includes these updates:

  • Added note that the flat-fee individual mandate penalty amounts increase for inflation each year, although no specific adjustment amount has been announced by the IRS.
  • Added tax year 2018 affordability information: 9.56% of Federal Poverty Level, 9.56% of W-2 Box 1 Income, and 9.56% of Rate of Pay.


We encourage you to use these forms for your 2017 and 2018 business. They will help increase your enrollment and explain the individual mandate to enrolling employees – a win-win for all.


If you have any questions, contact your Word & Brown representative – or email the WBCompliance team at


More about the author:

Paul Roberts is our Compliance Manager, leading the General Agency’s dual-state Compliance team. Paul is a tenured veteran in our industry, carrying a long history of health insurance experience with an education in business management. He has worked nearly every operational role at the Word & Brown General Agency and plays a key role in keeping our brokers in-line with health insurance compliance. Paul can frequently be found at industry events across California and Nevada delivering CE courses, staying educated, and working directly with brokers. This gives him the best ability to innovate and improve Compliance resources to support the businesses and abilities of our brokers. Paul is passionately dedicated to education, diversity, and helping others. He is grateful for his opportunity to support brokers and employers and is committed to your success. Please connect with Paul on Linkedin!

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