Important Affordable Care Act Details for Large Employers
Who Is Considered A Large Employer
The number of full-time employees determines whether an organization is considered a small or large employer under the law. Employers with more than 50 full-time equivalent employees are subject to the Affordable Care Act mandate that requires them to provide employees with affordable, qualified health coverage or be subject to a penalty.
Offering Coverage to Full-Time Employees
The Affordable Care Act defines full-time employment as an average of 30 hours per week. For large-group employers, employees with 30 or more hours of service per week or 130 hours of service per month must have access to affordable employer-sponsored health coverage. Employers who fail to offer coverage will be subject to a penalty of $2,000 per employee (minus the first 30 employees) if at least one full-time employee receives a premium-tax subsidy on coverage purchased through a state or federal exchange.
Employers with 50 or more employees should have already begun tracking full time equivalent employees (FTEs) via the Monthly Measurement Method or the Look-Back Measurement Method for stability periods starting in 2015.
Minimum Contribution Requirements
In 2016, employer-offered health insurance is not affordable if the cost to purchase coverage totals more than 9.66 percent of an employee’s annual household income (increased from 9.56* percent in 2015). For employers with 50 or more employees, failure to offer affordable coverage will trigger a $3,000 penalty per full-time employee who receives subsidized coverage through a state or federal exchange. This penalty only applies if an employee is required to pay more than 9.66 percent of his/her wages toward self-only coverage under the employer’s lowest cost plan that provides minimum value.
Because employers generally won’t know their employees’ household incomes, employers can take advantage of one or more of the three affordability safe harbors set forth in the final regulations that are based on information the employer will have available, such as the employee’s Form W-2 wages or the employee’s rate of pay. If an employer meets the requirements of any of these safe harbors, the offer of coverage will be deemed affordable for purposes of the Employer Shared Responsibility provisions regardless of whether it was affordable to the employee for purposes of the premium tax credit.
The three affordability safe harbors are (1) the Form W-2 wages safe harbor, (2) the rate of pay safe harbor, and (3) the federal poverty line safe harbor. These safe harbors are all optional. An employer may choose to use one or more of the safe harbors for all of its employees or for any reasonable category of employees, provided it does so on a uniform and consistent basis for all employees in a category.
*9.5 percent for employers who used affordability safe harbors in 2015.
Minimum Coverage Requirements
Employer-sponsored coverage must provide minimum value, meeting at least the “Bronze” level of coverage, per the guidelines released by The Department of Health and Human Services.
Summary of Benefits and Coverage (SBC) Notice Requirements
Employers must continue to provide their employees with a standard “Summary of Benefits and Coverage” explaining what their health plan covers and how much those services cost. The SBC must be made available to all eligible employees upon enrollment, renewal, when a plan has been modified and within 7 business days following a participant’s request for the document.
Small-Group Market Definition Changed
In 2016, small groups are now defined as having 1-100 employees.
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