By Gregory Franklin
Beginning January 1st, 2015, the employer shared responsibility requirements of the Affordable Care Act (ACA) mandates that most employers with 100 or more full-time employees or full-time equivalents must offer minimum essential coverage (MEC) to their employees and their dependents that meet a two-part test.
- The plan must meet Minimum Value requirements (benefit plans covers 60% of the average cost of coverage services) and
- must be “affordable”, the premium charged for employee-only coverage cannot be more than 9.5 percent of the employee’s income.
The employer shared responsibility provision will generally apply to larger employers with 100 or more full-time employees starting in 2015 and employers with 50 or more full-time employees starting in 2016. The ACA exempts all employers that have fewer than 50 full-time employees, including full-time equivalent employees from this employer shared responsibility provisions. However, for those large employers, they will have to comply with the ACA shared responsibility provisions or face a penalty.
For 2014, the employer penalty will be $2,000 per year multiplied by the number of full-time employees for each calendar month of the year minus the first 30 full-time employees for those that do not meet MEC. If employers offer MEC but it doesn’t meet the minimum value or affordability guidelines and any full-time employee is certified to receive a subsidy or cost-sharing reduction through a public exchange, the employer penalty will be $3,000 per full-time employee certified as eligible to receive a premium tax credit or cost-sharing subsidy — up to a maximum of $2,000 per year for each full-time employee, minus the first 30 employees. This penalty will be calculated calendar month to calendar month.
All employers should take three important steps to ensure they are continuously aware of their risk of penalty. First, determine and document full-time employees and equivalents. Second, evaluate how their benefits compare to what is available on the public exchange and finally, develop processes and procedures for monitoring employee hours of service.
While the ACA continues to evolve, to ensure its major goals of affordability and access to quality healthcare remain obtainable; the role of employer base coverage will be key in supporting its success. To that end, large employers should be mindful of changes in their workforce that affect their shared responsibility under the ACA.
Gregory Franklin is the CEO and co-founder of MyHealth Champions. A private health insurance exchange that provides healthcare coverage solutions and health benefits consultation for small and larger employers.