Employer Mandate – What does it really mean to you?

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Starting in 2015, the employer mandate under the Affordable Care Act has been in force. The mandate means that employers with 50 or more full-time employees or “full-time equivalents” (FTE) must provide the employees group health insurance. The IRS provided transitional relief for employers with 50 to 99 employees so long as they meet certain conditions. That relief, barring a last minute policy change, goes away starting in 2016.

What is the individual mandate?

Before the Affordable Care Act, people without health insurance would often have to go to the emergency room at a local hospital to acquire treatment. By law, emergency rooms were required to provide whatever health care services were needed by people who showed up at their doors. The arrangement proved to be a tremendous burden for health care providers, who would often not be compensated for the services rendered.

The individual mandate requires almost all Americans to get some kind of health insurance so that they will be covered for medical expenses. People with lower incomes have subsidies available to help pay for that insurance if they are obliged to acquire it on the open market. If a person chooses not to obtain a health insurance policy, they will likely be assessed a tax or penalty that is used to defray the costs of their health care. The law provides exemptions in cases where available health care insurance is considered “unaffordable.’

Why does the employer mandate exist?

The main thrust of the Affordable Care Act is to provide every American with health insurance. The idea is that access to health care, which such insurance provides, is considered by the government to be a right. Most Americans of working age get their health insurance through their jobs. The advantage in getting a group insurance plan through one’s employer is that the premiums tend to be less than for individual plans bought in the marketplace. The employer mandate makes this arrangement a requirement for employers with 50 or more employees. This gives Americans the option of obtaining such insurance that otherwise would have to be acquired through the health care insurance marketplace as required by the individual mandate.

What kind of health care insurance is required of employees under the mandate?

The group health insurance offered under the employer mandate has to provide “minimal essential coverage that is deemed affordable.” In 2015, the minimal essential coverage would provide for 60 percent of covered health care expenses. “Affordable” means that it will cost no more than 9.56 percent of an employee’s annual income.

What are the penalties to an employer for not offering group health insurance?

If an employer has 50 or more employees and meets certain other conditions and fails to provide their employees with affordable health care insurance that provides minimal essential coverage, a penalty will likely be assessed.

The conditions that would expose an employer to a penalty is defined thus:

“At least one full-time employee purchases coverage through the Health Insurance Marketplace; and

“That employee is eligible for, and receives, a Federal premium tax credit in order to subsidize the cost of their coverage.”

One of two penalties is possible.

If the employer fails to provide coverage to 95 percent of its full-time or FTE employees and the two above conditions are met, an annual penalty of up to $2,000 per employee excluding the first 30 employees can be assessed.

If the employee provides coverage to 95 percent of employees, but the coverage fails the affordability test, and the two conditions are met, and then the lesser of one of two penalties can be assessed.

“$3,000 for each full-time employee that receives subsidized coverage through the Health Insurance Marketplace; or

“$2,000 for each full-time employee, excluding the first 30 full-time employees.”

Conclusion

The state of health care law is in flux and could change at any time, especially considering that an election is drawing close. Employers are encouraged to seek legal counsel to ascertain the best policy to comply with the employer mandate going forward.

For more information contact us.

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