The Affordable Care Act (ACA), often referred to as Obamacare, brought about significant changes to the healthcare landscape in the United States. One of its key provisions is the requirement for mid to large employers to offer affordable health insurance to their employees. In this post, we’ll look at the ACA requirements for mid to large employers, helping you understand your obligations and ensuring compliance.
Who Qualifies as a Mid to Large Employer?
Under the ACA, an employer is considered a mid to large employer if they have 50 or more full-time or full-time equivalent (FTE) employees. Full-time employees work, on average, at least 30 hours per week, or 130 hours per month. FTEs are calculated by aggregating the hours worked by part-time employees to determine how many full-time equivalents they represent.
Understanding the Employer Mandate
The Employer Mandate, also known as the Shared Responsibility Payment, is a central component of the ACA for mid to large employers. It stipulates these employers must provide health insurance coverage to their employees or face financial penalties. Here’s what you need to know about this mandate:
- Offering Minimum Essential Coverage (MEC): Employers must offer MEC to at least 95% of their full-time employees (and their dependents) to comply with the mandate. MEC typically includes preventive care, hospitalization, and other essential benefits.
- Affordability and Minimum Value: The coverage offered must meet certain affordability and minimum value standards. Coverage is considered affordable if the employee’s share of the premium for self-only coverage does not exceed 9.5% of their household income. Minimum value means the plan covers at least 60% of the total allowed costs.
- Reporting Requirements: Employers must report information about the coverage they provide to the IRS and their employees through Forms 1094-C and 1095-C. Accurate and timely reporting is crucial to avoid penalties.
Consequences of Non-Compliance
Failing to meet the ACA requirements for mid to large employers can result in significant financial penalties. Employers who do not offer MEC to at least 95% of full-time employees or whose coverage is unaffordable or doesn’t meet minimum value standards may be subject to penalties. Penalties are assessed on a monthly basis per employee who receives subsidized coverage through the Health Insurance Marketplace.
It’s important to note that while the ACA requirements remain in effect, the individual mandate, which required individuals to have health insurance, was effectively repealed in 2019. However, the employer mandate remains a key aspect of the ACA.
Strategies for Compliance
Navigating the ACA requirements can be complex, but several strategies can help mid to large employers stay compliant:
- Review Workforce Classification: Carefully classify employees as full-time, part-time, or seasonal to determine your obligations accurately.
- Offer Affordable Coverage: Ensure your health plans are affordable and provide minimum value to avoid penalties.
- Maintain Accurate Records: Keep comprehensive records of employee hours and health coverage to facilitate reporting and compliance.
- Seek Professional Guidance: Consider consulting with legal and financial experts who specialize in ACA compliance to ensure your organization is on the right track.
Complying with the ACA requirements for mid to large employers is essential not only to avoid penalties but also to provide your workforce with essential healthcare benefits. By staying informed and seeking professional guidance when necessary, mid to large employers can successfully navigate the complexities of ACA compliance and offer their employees the healthcare coverage they need.