Understanding the Employer Mandate: Do Employers Have to Offer Health Insurance?
In recent years the United States has seen significant changes in healthcare policies legislation. One key component of the Affordable Care Act (ACA) is the Employer Mandate which requires certain employers to offer health insurance coverage to their employees. This article aims to provide a clear understanding of the Employer Mandate the obligations it brings for employers.
What is the Employer Mandate?
The Employer Mandate also known as the Employer Shared Responsibility Provision is a provision of the ACA that requires businesses with a certain number of employees to offer affordable health insurance coverage to their full-time employees or they may face penalties.
Which Employers are Obligated?
The Employer Mandate applies to businesses that employ an average of at least 50 full-time equivalent employees (FTEs) during the previous calendar year. Full-time equivalent employees are a combination of full-time employees working 30 or more hours per week part-time employees whose hours are aggregated treated as full-time equivalents.
What are the Employer Mandate Penalties?
If an employer is subject to the Employer Mandate but fails to offer affordable health insurance coverage to eligible employees they may face penalties. The penalties are also triggered if the health insurance offered does not meet the minimum value or affordability requirements as set by the ACA.
The penalties are assessed monthly are based on the number of full-time employees who would qualify for premium tax credits through the Health Insurance Marketplace. However employers are generally only subject to penalties if at least one of their full-time employees obtains premium tax credits through the Marketplace.
Affordable Care Act Reporting Requirements
In addition to offering health insurance coverage employers subject to the Employer Mandate must comply with ACA reporting requirements. This involves providing the IRS employees with information about the health insurance coverage offered provided to employees.
There are two reporting forms that employers must submit annually:
- Form 1095-C: This form provides information about the employer’s offer of coverage whether the coverage meets affordability minimum value requirements the employees who were covered.
- Form 1094-C: This form is used to summarize transmit the 1095-C forms to the IRS.
Affordability Minimum Value
Affordable health insurance means that the employee’s share of the premium for the lowest-cost self-only coverage does not exceed a certain percentage of their household income. The specific percentage is adjusted annually based on the Federal Poverty Level guidelines.
Minimum value refers to health insurance coverage that pays at least 60% of the total cost of allowed benefits. If the coverage does not meet this requirement it is considered not to offer minimum value.
The Employer Mandate is a key component of the Affordable Care Act that requires certain employers to offer health insurance coverage to their employees. By understanding the obligations penalties associated with the Employer Mandate employers can ensure compliance with the ACA provide their employees with access to affordable healthcare options.
For employers subject to the Employer Mandate it is important to navigate the complexities of the ACA reporting requirements including the submission of Forms 1095-C 1094-C. Seeking guidance from legal tax professionals can be helpful in ensuring compliance with these obligations.