Employer Mandate – “Pay or Play”
The Affordable Care Act does not impose a straight-forward requirement that employers offer health insurance. However, large employers (at least 50 full-time equivalent employees) that do not offer coverage or that offer coverage that is unaffordable, may be assessed a penalty.
The Affordable Care Act defines a full-time employee as anyone who is working an average of at least 30 hours per week. To determine whether an individual is full-time, employers should look back at a standard measurement period of not less than three but not more than twelve consecutive months to determine whether the individual worked an average of at least 30 hours per week.
Part-time employees’ hours are converted into full-time equivalent (FTE) employees for the purpose of determining whether the employer is a large employer and subject to the employer mandate. Conversion is done by adding up all of the hours worked in a month by employees who are not full-time employees and dividing the total by 130. For example, if 6 part-time employees each work 5 hours per week, they will count as if the firm has one additional full-time equivalent employee.
Large employers are not required to offer coverage to part-time employees, but their hours are used to determine whether the employer is subject to the “pay or play” mandate.
If you have a large seasonal work-force, please contact us for additional guidelines.
Group coverage is considered affordable if the plan covers at least 60% of healthcare expenses AND if what the employer charges the employee for “employee only” coverage does not exceed 9.5% of the employee’s income. If an employee is offered affordable coverage, neither he or his dependents will qualify for a subsidy in the exchange, even if the employer contributes nothing toward the dependent premium.
If a group with at least 50 FTE employees does not offer coverage and at least one employee buys health insurance through the individual exchange AND receives a subsidy, the employer will be assessed an annual penalty of:
$2000 per employee x the # of full-time employees (minus the first 80 employees)
If a group with at least 50 FTE employees does offer coverage but it is deemed unaffordable and at least one employee buys health insurance through the individual exchange AND receives a subsidy, the employer will be assessed an annual penalty of the LESSER of:
$3000 per employee receiving the subsidy
$2000 per employee x the # of full-time employees (minus the first 30 employees)
For groups with fewer than 50 FTE employees there is no requirement to offer coverage and no penalties apply. However, if a small employer does offer affordable coverage, neither an employee nor his dependents will qualify for a subsidy on the individual exchange.