Under the Affordable Care Act (ACA), businesses with 50 or more full-time equivalent (FTE) employees that do not offer health coverage, or that offer health coverage that does not meet certain minimum standards, may be subject to a financial penalty, referred to as the Employer Shared Responsibility payment. The Employer Shared Responsibility provisions, often referred to as the “employer mandate,” have been in effect since 2015 for businesses with 100 or more FTE employees. But, starting in 2016, the employer mandate will become effective for businesses with 50 or more FTE employees. The purpose of this summary is to provide a brief overview of the employer mandate provisions, and to inform your business about how you may be impacted by changes to the provisions made in 2016.
Overview of the Employer Mandate
Starting in 2016, the employer mandate will be enforced for businesses with 50 or more FTE employees. A business may have to pay a per-employee, per-month fee called the Employer Shared Responsibility Payment if the business:
- Does not offer coverage (to at least 95 percent of FTE employees) that complies with specified reforms under the Affordable Care Act.
- Does not offer coverage that meets minimum value. (The plan’s share of the total average cost of covered services is at least 60 percent).
- Does not offer coverage that is affordable. (The employee’s premium is more than 9.66 percent of that employee’s annual household income).
If a business does not offer coverage, the Employer Shared Responsibility Payment penalty is triggered when an employee who is not offered coverage purchases health insurance on an exchange and receives a federal subsidy to help pay for that coverage. The penalty is assessed monthly and is equal to the number of FTE employees (minus the first 30) multiplied by one-twelfth of $2,000.
If a business offers coverage, but that coverage does not meet minimum-value and affordability requirements, the penalty is triggered when an employee rejects offered coverage and purchases health insurance on an exchange and receives a federal subsidy to help pay for that coverage. The payment is assessed monthly and is the lesser of: one-twelfth of $3,000 per FTE employee receiving federal subsidies through the exchange, or one-twelfth of $2,000 per full-time employee (minus the first 30).
View additional resources for California employers to understand the new requirements under the Affordable Care Act.
FAQs
The Affordable Care Act's (“ACA”) Employer Mandate aims to increase health coverage among employees by presenting applicable large employers (“ALEs”) (i.e., those with 50 or more full-time or full-time equivalent employees on average during the prior year) with the choice to either “pay or play” under its rules—either ...
What are the requirements for ESRP? ›
The ESRP requires applicable large employers (ALEs) to offer a health insurance plan with minimum essential coverage (MEC). The plan must be affordable and provide minimum value (MV). An ALE is any organization with 50 or more full-time equivalent employees (FTEs).
What is the 95% rule for ACA? ›
Employers must offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to the end of the month in which they turn age 26, or be subject to penalties. This is known as the employer mandate.
Does ACA rule apply to small employers? ›
Small business owners with fewer than 50 full-time employees are not required to offer health care coverage to their employees. However, you should know that if a small business with fewer than 50 full-time employees does offer coverage, then that coverage must comply with the requirements of the ACA.
What does mandate mean in work? ›
an official order or requirement to do something: mandate to do sth Norad's mandate is to promote effective management of funds for development assistance.
What is the ACA employer mandate 2024? ›
Under the Employer Mandate portion of the ACA, organizations with 50 or more full-time and full-time equivalent employees must offer Minimum Essential Coverage (MEC) that is affordable and meets Minimum Value (MV) to at least 95% of their workforce and their dependents.
What is the ACA employer shared responsibility mandate? ›
The Affordable Care Act requires certain employers with at least 50 full-time employees (or equivalents) to offer health insurance coverage to its full-time employees (and their dependents) that meets certain minimum standards set by the Affordable Care Act or to make a tax payment called the ESRP.
What two conditions must an employer meet to provide a Qsehra? ›
To qualify for a QSEHRA, a small employer generally must:
- Have fewer than 50 full-time employees.
- Provide the arrangement on the same terms to all full-time employees (reimbursem*nt amounts may only vary based on age and the number of individuals covered)
The employer shared responsibility provision of the Affordable Care Act penalizes employers who either do not offer coverage or do not offer coverage that meets minimum value and affordability standards. These penalties apply to firms with 50 or more full-time equivalent employees.
What is the 80 20 rule for ACA? ›
The 80/20 Rule generally requires insurance companies to spend at least 80% of the money they take in from premiums on health care costs and quality improvement activities. The other 20% can go to administrative, overhead, and marketing costs. The 80/20 rule is sometimes known as Medical Loss Ratio, or MLR.
At a high level, the LBMM requires tracking employee hours for a certain period, called the “measurement period,” which determines the employee's FTE status for a subsequent period, called the “stability period.” The LBMM requires the plan sponsor to establish three things: (1) a “measurement period” of 3 to 12 months, ...
What is the 13 week rehire rule? ›
An individual rehired after a break in service of less than 13 weeks is considered to be a continuing employee. An individual rehired after a break in service of at least 13 weeks is considered to be a new hire (26 weeks for educational organizations).
Do all employers have to file ACA? ›
(Federal ACA law only requires employers with 50 or more employees to report health insurance information). Employers must submit all forms electronically through the MFT SecureTransport (Axway) service.
What employers must comply with ACA? ›
If you have 50 or more full-time employees, including full-time equivalent employees, you are an applicable full-time employer and need to issue statements to employees and file an annual information return reporting whether and what health insurance you offered employees.
Can my small business pay for my health insurance? ›
Under federal law, qualifying small businesses can now fund special health reimbursem*nt accounts for their employees to purchase individual or family health insurance. Within limits, the money deposited into the account is tax-deductible for qualifying small businesses.
What is the purpose of health insurance mandate? ›
The purpose of the federal or state mandates to carry coverage is to avoid free-rider problems and adverse selection problems in health insurance pools, so that there are not disproportionately many sicker people, or older people more likely to get sick, in the insurance pools.
Can an employer mandate health insurance? ›
Do I have to offer health insurance in California? No, however, the federal government requires organizations with 50 or more full-time equivalent employees to provide health insurance that meets minimum essential coverage (MEC).
Does the ACA mandate that employers with 25 or more employees offer health insurance as an employee benefit? ›
The Affordable Care Act requires employers with 50 or more full-time equivalent employees to provide health coverage to at least 95% of full-time employees and sets a minimum baseline of coverage and affordability.
What is the employer shared responsibility payment? ›
The employer shared-responsibility payment is the penalty that's assessed on large employers if they don't offer adequate, affordable health coverage to their full-time employees and at least one of those employees gets subsidized coverage in the exchange/Marketplace.
