Anthem BlueCross Blue Shield, June 3, 2015
What is the employer mandate?
For 2015, large companies with 50 or more employees had to offer minimum value, affordable health care coverage to their full-time employees or face a penalty. They also may have to pay a penalty if any of their employees get government aid to lower their health coverage costs. This penalty is essentially a non-deductible, extra tax.
Midsize businesses with 50 to 100 employees were allowed to delay this mandate until 2016, if they met certain conditions for transition relief. But by January 1, 2016, all midsize employers with 50 to 100 full-time employees and equivalents (FTEs) must have a health care plan option in place that meets minimum essential coverage for 95 percent of their employees. That’s the requirement given by the Affordable Care Act (ACA or health care reform law). Employers who fail to prepare properly will face penalties.
What is minimum essential coverage?
The health care plan an employer offers must be considered minimum essential coverage. Stated briefly, this means that it must:
- Supply minimum value by covering at least 60% of the total cost of benefits.
- Be affordable. The premium for covering the employee must be less than 9.5% of the employee’s income.
How do employers calculate the number of employees?
Calculating the number of employees can be complicated. Employers should speak with their attorney or tax adviser for help. But here are the basic steps:
- Count the employees who worked at least 30 hours per week each month (including seasonal employees) in the prior calendar year.
- Count the employees considered full-time by adding the number of hours worked by all part-time employees (as well as seasonal) and dividing by 120.
- Add the monthly totals of steps 1 and 2 and divide by 12.
If the result is less than 50, the employer doesn’t have to offer health coverage.
What are the penalties?
There are different kinds of penalties, based on what part of the rule the employer didn’t follow. Employers have to pay a penalty for:
- Not offering health coverage to full-time employees and their dependent children to age 26, and if any full-time employee gets government aid to lower the cost of coverage. The annual penalty is $2,000 x the number of full-time employees, minus the first 30 employees.
- Offering health coverage for only part of the year. The penalty is based on the number of full-time employees and the number of months coverage was not offered.
- Offering health coverage to 95% of full-time employees but one or more full-time employees gets government aid to lower the cost of their coverage because the coverage is not considered affordable. The annual penalty is $3,000 per employee getting government aid.
The U.S. Chamber of Commerce has developed this penalty calculator to help determine whether companies must offer coverage and what the penalty might be based on the number of full-time employees.
For more information about the employer mandate and penalties, see this fact sheet with frequently asked questions on our health care reform website.
This article applies to:
- Nevada and Colorado
- Small Group and Large Group
