ACA and Large Employers

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA and Employers >> ACA and Large Employers (last updated 5.22.15)

Topic Outline

1 Overview
2 Employer Mandate
3 Resources
4 Research and Analysis

Overview

Large employers (50 or more full-time workers) are required to provide affordable health benefits to full-time workers and their non-spouse dependents. For those providing health benefits, these plans are subject to the same group health plan requirements as small employers. The resources listed below are targeted specifically at large employers or have major breakouts showing how large businesses (including government) are affected.

Employer Mandate

The ACA requires large employers (50 or more full-time-equivalent employees) to provide “qualified” and “affordable” health coverage for all of their full-time employees. If they do not offer coverage and at least one full-time employee receives a tax credit to subsidize the purchase of insurance in the Exchange, the employer is liable for an annual penalty of $2,000 per full-time employee (excluding the first 30 employees). This penalty is assessed on a monthly basis. Thus, if an employee works 121 hours in a given calendar month, that 121st hour costs the employer an additional $166.67 (one-twelfth of $2,000).

Full-time is defined as 30 hours or more per week, or 120 hours or more per month.
Qualified coverage has an actuarial value of 60%.
Affordable means that the employee share of premiums for the least expensive single coverage plan offered does not exceed 9.5% of an employee’s income.

The employer must pay a penalty of $3,000 per full-time employee who obtains subsidized Exchange coverage because offered employer-provided coverage is not qualified or affordable so long as this amount does not exceed the penalty that would be imposed for not offering coverage whatsoever ($2,000 per employee excluding the first 30 workers). For most employers, the $3,000 penalty per full-time worker receiving subsidized Exchange coverage will be smaller than the $2,000 per worker penalty.

The IRS Has Put a Stop to This Obamacare Workaround. “When companies started exploring their options for complying with the Affordable Care Act a few years back, some likely considered not offering coverage at all, and instead sending their employees to the individual health exchanges with pre-tax money to help cover their premiums. Now that option is off the table. A rule the IRS issued last year—and clarified in a Q&A posted online last month—states that using pre-tax funds to subsidize individual plans purchased on or off a public exchange violates the ACA, commonly known as Obamacare. And companies that do so could face fines in the form of a $100-a-day excise tax for each employee they offload onto the health exchanges.” (Entrepreneur, 6.19.14)

Resources

On-line Resources

American Benefits Council | Health Care Reform. The Council is a preeminent advocate of employer-sponsored benefit programs in Washington, D.C.
Anthem, Making Health Care Reform Work is one-stop resource for reform information for small and large businesses.
HealthReformReport.com, Business provides detailed information about provisions affecting business, listed by topic and providing an implementation timeline focused on these changes.

Research and Analysis

How Will PPACA Affect Small, Medium and Large Businesses? (Urban Institute)
Eibner, C., F. Girosi, A. Miller, A. Cordova, E. A. McGlynn, N. M. Pace, C. C. Price, R. Vardavas, and C. R. Gresenz, Employer Self-Insurance Decisions and the Implications of the Patient Protection and Affordable Care Act as Modified by the Health Care and Education Reconciliation Act of 2010 (ACA), Santa Monica, Calif.: RAND Corporation, TR-971-DOL, 2011.
Maxwell, Nan. The Health and Wealth of a Nation: Employer-Based Health Insurance and the Affordable Care Act. Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 2012. 203 pp. $20.00 paper.
The Unanticipated Consequences of Postponing the Employer Mandate. “The Obama administration’s decision to postpone implementation of the employer mandate is the latest in a series of delays and alterations of the Affordable Care Act (ACA). But postponing the mandate — which requires larger employers to offer lower-income workers health insurance coverage similar to that available in the new insurance exchanges, on equal and affordable financial terms — may create large ripple effects. The good news is that as compared with instituting the mandate as planned, postponing it should barely increase the number of uninsured Americans after ACA implementation. But it affects other provisions, particularly the individual subsidies for purchasing insurance, and creates distorted incentives that may leave the government paying significantly more than planned.” (New England Journal of Medicine, 7.31.13)