Requirement to offer coverage
The employer mandate applies to large employers with 50 or more full-time employees including full-time equivalents.
The employer mandate does not apply to small groups with 2-49 employees.
It requires the employers to offer minimum essential coverage (MEC) to at least 95% of their full-time employees and their eligible dependents (children up to age 26 or state required age). The coverage must also be both affordable and meet minimum value requirements. Otherwise, the employer risks paying a penalty.
A penalty would generally apply if an employee applied to the public Marketplace and was deemed eligible for a subsidy either because the employee did not receive an offer of MEC or the coverage the employer offered did not meet minimum value or affordability requirements.
Coverage is considered affordable if employee contributions are less than 9.56% of the employee’s income.
To meet minimum value, the plan must pay 60% of the cost of covered health services. The minimum value calculator is available online.
Health benefits plan requirements
Employers should be able to avoid potential employer mandate penalties if they offer a plan that meets these requirements.
Provide minimum essential coverage (MEC)
MEC must be offered in the small or large group health insurance market and be a group health plan under ERISA.
The following plan types alone will not constitute MEC: disability, accident, critical illness and indemnity.
Be affordable to the employee
The required share of the employee’s premium for self-only coverage must not exceed 9.56% of an employee’s household income. Under the employer mandate rules, employers can use one of three safe harbor tests to determine affordability.
Satisfy the minimum value requirement
The health plan must pay at least 60% or more of the plan’s total allowed benefit costs anticipated for a standard population.
Offer health insurance coverage to dependent children up to the age of 26
- Coverage does not have to be offered to spouses,foster children or stepchildren.
- A child who is not a U.S. citizen or national is excluded from the definition of dependent unless that child is a resident of a country contiguous to the United States or is within the exception for adopted children provided by applicable law.
Employer reporting requirements
See section on Reporting 6055 and 6056 for details on reporting.