Employer-provided coverage is the most common method by which Americans get their health insurance, covering about 170 million workers and dependents annually.1 All companies that employ 50 or more full-time equivalent employees (FTEs) will be required to provide qualifying health benefits to their full-time workers under the Affordable Care Act (ACA) by 2016. Employees that average 30 hours or more of work in a week during a month are considered to be full-time under the ACA.
Although employers will not be required to cover part-time employees, the 50-employee threshold triggering the mandate applies to FTEs, which are calculated including hours from part-time employees. The number of FTEs for a month is the sum of (1) the number of full time employees and (2) the number of part-time employee work hours divided by 120.2
The mandate to offer health insurance coverage to full time workers extends to the full time workers’ dependents. Children of employees must be eligible for inclusion on the employee’s health insurance through age 26. Spouses, however, are not considered to be dependents. Companies that employ less than 50 full-time equivalent employees are exempt from the employer mandate and are not legally required to provide or subsidize health insurance for their employees.3
If an employer with at least 50 full-time equivalent employees does not offer coverage to their employees and at least one of their full-time employees receives a federal premium subsidy for marketplace coverage, then the employer will pay an annual penalty of $2,000 per full time employee, not including the first 30 full time employees. If the coverage does not pay at least 60% of covered health care expenses for a typical population or if any employees have to pay more than 9.5% of family income for employer coverage, then the employer will pay an annual penalty that is the lesser of either (1) $3,000 times the number of full-time employees receiving a tax credit or (2) $2,000 times the number of full time employees (not including the first 30).4
The employer mandate and the individual mandate for consumers were both scheduled to go into effect in January 2014, but the employer mandate portion of the ACA has been delayed one year for employers with 100 FTEs and two years for employers with 50-99 FTEs.
Employers with at least one hundred FTEs will not be required to provide health plans until 2015, and in 2015 those employers only must provide coverage to at least 70% of full time employees. In 2016 all employers with at least 50 FTEs must provide coverage to at least 95% of full time employees. Even if an employer provides coverage to 95% of their employees, they may still have to pay an annual penalty of $3,000 times the number of full-time employees that were not offered coverage and that received a tax credit.5
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