What is the Affordable Care Act employer mandate?
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UPDATED: Mar 19, 2020
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- The employer mandate, also known as the employer shared responsibility payment, requires most large companies to offer health insurance to their full-time employees or be responsible for paying a fine
- The mandate does not apply to companies with less than fifty full-time employees or to part-time employees
- Employers must offer insurance that meets the minimum value and affordability standards
- Employers with less than 25 full-time equivalent employees with an average annual income of less than $50,000 can apply for health insurance tax credits through the SHOP marketplace
- If you are a full-time employee of a large company and are not offered health insurance, you may be eligible for tax credits on a marketplace plan
Businesses with more than 50 full-time equivalent employees are required to offer health insurance to their full-time employees under the Affordable Care Act regulations.
The number of full-time equivalent employees is calculated by averaging the amount of part-time and full-time hours worked.
Employers must offer insurance to 95 percent of their full-time employees, not necessarily 100 percent and must cover dependents up to the age of 26.
Employers with 200 or more full-time employees must automatically enroll their new employees in the health insurance plan. They must also provide an opt-out to this enrollment.
In order to be considered a full-time employee, you must work a minimum of 30 hours a week or 130 hours a month for 120 days or more.
If your employer does not offer coverage to their full-time employees, they will have to pay a fine of $2,000 for each full-time employee except for the first 30 full-time employees.
Fees are calculated by each full-time employee, not full-time equivalent employees. This fee is monthly so employers only pay 1/12th of the fine for each month that full-time employees went without insurance.
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What are the affordability requirements under the Affordable Care Act?
Employers must offer plans that are affordable and meet the minimum value requirements. Minimum value typically means that the plan has an average cost sharing of 60 percent and most of the costs go towards covering your healthcare needs.
In order to be considered affordable, your health insurance plan can’t cost more than 9.69 percent of your household income after your employer contribution. This cost is the total amount that you would pay, not necessarily the total monthly premium amount.
If your employer provides coverage that does not meet the minimum value or affordability requirements, they still have to pay the shared responsibility fine.
The fee for not meeting the requirements is either $3,000 for each full-time employee receiving tax subsidies from the healthcare marketplace or $2,000 for each full-time employee except for the first 30 employees.
Your employer will have to pay whichever of the two options costs less.
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What is the Small Business Health Options Program (SHOP)?
Employers with less than 50 full-time employees are exempt from the mandate. However, they can still purchase health insurance plans for their employees through the Small Business Health Options Program(SHOP) exchange.
Businesses with up to 100 employees are also eligible to use the SHOP exchange. Employers who use SHOP may qualify for a small business tax credit that can help cover up to 50 percent of the cost of your premium.
If you are a small business owner and use the SHOP exchange, you must offer coverage to all of your full-time employees and in most states, a minimum of 70 percent of your full-time employees must enroll in the plan. Each state runs their own SHOP marketplace.
What if my employer does not offer me health insurance?
You can apply for a plan on the healthcare exchange marketplace if your employer does the following:
- does not offer you health insurance when they are supposed
- offers what is considered unaffordable coverage
- does not meet minimum value standards
You can still qualify for tax subsidies and other cost sharing assistance.
However, if your employer does offer you adequate insurance and you choose not to take it, you will not qualify for marketplace savings.
For this reason, you should typically take your employer-sponsored coverage. When you start a new job, you are entitled to a special enrollment period to join the new insurance plan.
The Affordable Care Act employer mandate requires large employers to provide health insurance to their full-time employees or they will be responsible for paying a fine.
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