The Affordable Care Act includes many requirements for insurers and employer sponsors of health and welfare plans, including a mandate that employers provide affordable health coverage to employees or pay a penalty (often referred to as the pay or play requirement). The employer coverage mandate, originally due to be effective in 2014, has been delayed to 2015. The mandate generally applies to employers with 50 or more full-time employees, and requires these employers to offer affordable health care coverage to their employees or pay a penalty.
There are separate penalties for failure to offer coverage and failure to offer affordable coverage. An employer will generally be assessed a penalty of $2,000 per full-time employee in excess of 30 employees if the employer does not offer coverage or offers coverage to less than 95% of full-time employees, and at least one full-time employee obtains a tax credit or cost sharing assistance.
Even if an employer offers coverage, the employer will be assessed a separate penalty if at least one full-time employee receives a premium tax credit to help pay for coverage on an exchange and the coverage is unaffordable for that employee or does not provide minimum value. Generally, coverage is unaffordable if the cost exceeds 9.5% of the employees household income and the employee falls within 100%-400% of the federal poverty level.
A plan does not provide minimum value if the plans share of allowed costs under the plan is less than 60% of the total allowed cost of benefits expected to be incurred under the plan. The penalty for providing unaffordable coverage (or coverage that does not provide minimum value) is generally $3,000 per full-time employee who receives a federal subsidy, capped at $2,000 per full-time employee in excess of 30 employees. Proposed regulations were issued on this requirement and guidance is expected in the near future.
The employer coverage mandate and other ACA requirements relevant to employer sponsors of health and welfare plans will be discussed in detail as part of the ACA Update What Went Right, What Went Wrong And What Now? presentation at the Workplace Benefits Renaissance on Feb. 24, 2014.
Kerpen is partner at McDermott Will & Emery LLP, in Washington, D.C. Reach her at (202) 756-8193 or firstname.lastname@example.org.
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