Much has been said about the employer mandate over the past few weeks. It’s been in the news a lot because of the delay of its implementation to 2015, and it’s been a popular for politicians – who are opposed to the ACA – to take the position that the obvious next course of action should be a similar delay of the individual mandate. I’ve explained why that doesn’t make sense – just because they’re both referred to as a mandate doesn’t make them comparable elements of the ACA. The employer mandate will help to provide the ACA with financial strength, but the individual health insurance mandate is a much more crucial leg of the legislation – without it, other aspects of the law (like guaranteed issue coverage in the individual market) would topple.
- The employer shared responsibility mandate applies to employers with 50 or more full time or full time equivalent employees. “Full time equivalent” applies when a business has part time employees: The total amount of hours worked per month by all of the part-time employees is added up and then divided by 120 to get the number of “full time equivalent” workers. So if you have 100 workers who each work 80 hours per month, you have 67 full-time equivalent workers (8000/120).
- The requirement to offer coverage applies to all full-time workers, which is defined as 30 or more hours per week.
- The coverage has to cover at least 60% of total allowed costs, which is comparable to the bronze level of coverage in the individual market.
- The coverage has to be “affordable”, which means that the employee contribution (for the employee’s coverage only, not counting dependents) cannot be more than 9.5% of the employee’s wages.
- Coverage has to be offered for the employee and any dependent children up to age 26 (employees are not required to keep their children on their policies until age 26, but they have to be given the option to do so if they want). But the calculation to determine “affordability” of the premiums is based on the employee’s coverage only.
- Employers are not required to pay for coverage for a spouse. Employees can choose to add their spouse to their plan if they want (this is no different from the way employer coverage currently works), but the employer is not required to contribute financially towards the spouse’s premium. So total employee contributions can exceed 9.5% of wages if the employee opts to add family members to the plan, and the coverage would still be deemed “affordable”.
- If a large employer does not offer 60%+ actuarial value, “affordable” health insurance to eligible workers and at least one worker ends up getting individual health insurance through a state exchange and getting premium subsidies or a cost-sharing reduction on their policy, the penalty will be applied to the business.
- The details of the penalty assessment are explained on the first page here, but they’re much more clearly illustrated in the example that Cigna put together (see page 3). The amount of the penalty depends on whether the employer isn’t offering coverage at all, or if they’re offering coverage that isn’t up to the minimum standards and/or affordability requirements. For the purpose of penalty calculation, the first 30 employees are subtracted from the equation (so if you have 150 employees, the penalty is calculated based on 120 instead).
I’ve heard some people say that the employer mandate requires employers to pick up the entire tab for employees’ health insurance, and this is incorrect. I’ve also heard people who are obviously confused about the scope of the mandate and think that it will apply to all businesses – this is obviously false, as most businesses have too few employees to fall under the provisions of the employer shared responsibility portion of the ACA.