The Employer Mandate is a part of the Affordable Care Act (ACA) that penalizes employers who do not offer health insurance coverage to their employees and dependents. The health plan has to meet certain criteria of the ACA and meet the definition of affordable to the employee. It does not address affordability to the dependents. The mandate applies to large employers with 50 or more full time employees or the equivalent of 50 full time employees. Employers with 100 or more full time employees and 50-99, will need to comply in 2015.
When would the Penalty apply?
In general (because no one knows for sure) if an employee applied for coverage on the Federal Marketplace and was found eligible for a tax credit, because they were not offered an employer health plan or the group health plan did not meet the requirements of the ACA.
In 2015, the Employer Mandate will apply to companies with 100 or more full time employees or the equivalent.
The penalty may apply to 3 different situations for a large company listed below:
Situation #1
- The large employer does not provide group health insurance coverage and an employee qualifies for a tax credit or cost sharing reduction on the Marketplace and enrolls in that individual plan.
- The penalty is $2,000 per full time employee. When calculating the penalty, the first 80 full time employee are subtracted from the penalty.
- The penalty is assessed per full time employee for each month an employer does not off coverage that meets the ACA.
Situation #2
- A large company offers coverage that is deemed unaffordable to a full time employee, and the employee then qualifies for a tax credit on the marketplace and enrolls in that plan.
- The annual penalty is $3,000 per full time employee that qualifies for a tax credit.
- The penalty is assessed per full time employee for each month the employee qualifies for premium assistance.
Situation #3
- The large employer provides a plan that does not meet the coverage requirements of the ACA. This then leads to the full time employee qualifying for tax credits on the exchange.
- The penalty is then assessed per full time employee, per month, who receives the tax credit
The Employer Mandate has created a lot of confusion here in Indiana and the rest of the country. Certain industries are scrambling on what to do. If you look at certain industries that have hourly wage employees, there is no good solution. Most of these companies are adopting a 29 hour work week. This decision comes with consequences because many employees then will go pick up 20 hours of work with the employers competition. These companies cannot afford to insure the employees either on a fully insured basis or self-funded.
Some of these industries have put in place group health plans that meet the requirements of the ACA. The employer is paying the majority of the premium for the employee only. The employer contribute anything towards the dependents premium and that cost is way more than that hourly wage the employee can afford. Having access to the group plan then disqualifies the dependents from getting tax credits on the exchange. Now there is a high level of frustration with the employees because they can’t afford to insure their dependents.
If your company is severely impacted by the Employer Mandate, there is no good solution only bad ones.
I can deliver you the best of the bad options!
Tony Nefouse
