The employer mandate applies to applicable large employers (ALEs) with 50 or more full-time employees (including full-time equivalents). It requires ALEs to either offer full-time employees and their dependents minimum essential coverage (MEC) that is affordable and meets minimum value requirements, or risk paying an excise tax (penalty). The penalty was delayed and only voluntary compliance with the mandate was encouraged for 2014. However, the penalty will go into effect in 2015 for employers with 100 or more full-time employees and full-time equivalents, and 2016 for most employers with 50-99 full-time employees and full-time equivalents (so long as they qualify under transition relief). A penalty would generally apply if an employee applied to the public exchange and was deemed eligible for a subsidy either because the employee did not receive an offer of MEC or the coverage the employer did offered did not meet minimum value or affordability requirements.
Frequently Asked Questions
What are the employer coverage mandate penalties?
Certain small employers (employing less than 50 full-time employees) are exempt from the employer mandate provisions. Beginning in 2015, employers with 100 or more full-time employees and full-time equivalents may be subject to a penalty if they do not offer their full-time employees the opportunity to enroll in a medical plan that provides minimum essential coverage (MEC), is affordable and meets minimum value requirements. If the employer does not offer MEC, the employer may be subject to a $2,000* per full-time employee per year penalty if even just one full-time employee applies and is found eligible for an applicable premium tax credit or cost-sharing reduction under the public insurance exchange. If the employer's coverage meets MEC but the coverage is deemed unaffordable and does not provide minimum value for some full-time employees, those employees may also obtain health insurance through a public insurance exchange and qualify for an applicable premium tax credit or cost-sharing reduction. In such case, the penalty would be $3,000* per full-time employee who qualified for the applicable premium tax credit or cost-sharing reduction.
*It is important to note that although the penalty enforcement was delayed until 2015 and in some cases 2016, the penalty amount is based on a 2014 enforcement date. Therefore, the penalty amounts listed ($2,000 and $3,000) will be adjusted annually, starting in 2015, and these numbers only reflect an estimate, not the true cost of the penalty.
While voluntary compliance with the mandate was encouraged for 2014, the penalty does not go into effect until 2015 for employers with 100 or more full-time employees and full-time equivalents, and 2016 for most employers with 50-99 full-time employees and full-time equivalents.
Is a grandfathered health plan subject to the requirements of the employer mandate?
The employer mandate is applied to employers, not plans. Employers who offer grandfathered plans are not exempt from the mandate, however, grandfathered plans are considered MEC under the employer mandate.
What type of coverage is considered MEC?
MEC is generally any government or employer-sponsored health plan, or individual health insurance coverage, except for excepted benefits and similar limited coverage. MEC includes coverage from one of the following sources:
Medicaid or the Children's Health Insurance Program (CHIP)
Veteran's health program
An employer's plan, including grandfathered plans, fully insured or self-funded
Health insurance plan purchased through the Exchanges, also called Health Insurance Marketplaces
Individual health insurance coverage purchased outside of the Exchanges
a grandfathered health plan in effect prior to 2014
Such other health benefit coverage, such as State health benefits risk pool, as the Secretary of Health and Human Services and Secretary of the Secretary of the Treasury, recognize
Is there any type of coverage not considered MEC?
Yes. While MEC is generally any government or employer-sponsored health plan, or individual health insurance coverage, the following types of coverage are not considered MEC:
Stand-alone vision care or dental care
Accident or disability policies
On-site medical clinics
Medicare supplemental coverage (Medigap) and similar coverage described in regulations
Medicaid coverage providing only certain specific benefits, such as pregnancy-related benefits or similar narrow Medicaid coverage
Line of duty and other limited types of TRICARE coverage