Large Groups (Over 50 Employees)

The Patient Protection and Affordable Care Act was passed on March 23, 2010 with the intent of improving the U.S. health care system. The legislation was primarily focused on bringing coverage to the uninsured and decreasing health care costs through changes implemented over the next several years. The law places certain legal obligations on individuals and employers as it relates to obtaining health insurance.

Companies employing 50 or more full-time and/or full-time equivalent employees are subject to the Pay or Play Mandate. This means you are now required to offer your employees health insurance or you must pay a penalty.

How to Determine the Number of Employees in Your Company
To determine the number of full-time equivalents, add up the total number of hours worked by your part-time employees and divide it by the number of hours a full-time employee would work in that period. This will tell you how many full-time equivalent employees you have. For example, two part-time employees who work 15 hours a week would equal one full-time equivalent employee working 30 hours a week. If you employ 50 or more full-time employees or full-time equivalents, you are subject to the Pay or Play Mandate which means you must offer your employees health insurance or pay a penalty.

If you do not employ 50 employees or more, you are not subject to the Pay or Play Mandate and will not be penalized for not offering health insurance. However, your health insurance plan will now only use modified community rates which could increase the costs of providing coverage for your company.

What penalties are there for not complying with the Pay or Play Mandate?
Employers who do not comply with the Pay or Play Mandate risk an annual a fine of $2,000 per full-time employee minus the first 30.

If your company offers health insurance which does not cover the Essential Health Benefits as mandated by ACA and/or does not pay at least 60% of covered health care expenses, your employees will have the option to shop the Exchange and receive a tax credit. However, your company will be penalized $3,000 for every employee who receives a tax credit. The maximum penalty for an employer is the equivalent of $2,000 per employee minus the first 30 employees. This maximum penalty would be the same as if you did not provide coverage at all as an employer. For example:

Company A has 200 employees, 50 of which are eligible for a tax credit. The penalty would be $3,000 x 50 = $150,000. This is well below the maximum penalty for this company of $340,000 (200 employees minus 30 equals 170 employees x $2,000 for a total of $340,000)

Company B has 200 employees, 150 of which are eligible for a tax credit. The penalty would be $3,000 x 150 = $450,000. This would exceed the maximum penalty, the penalty assessed if the employer offered no coverage at all.

If you provide health insurance that covers Essential Health Benefits and pays for at least 60% of covered health care expenses, but you have employees who would have to pay more than 9.5% of their family income for employee only coverage, those employees also have the option to shop the Exchange and may be eligible for a tax credit and the above examples would apply.

Which employees are eligible for a tax credit or subsidy?
Individuals earning between 100% and 400% of the federal poverty level are eligible for subsidies if they purchase insurance through the Exchange. For a family of one, 100% of the federal poverty level is $11,490 and 400% is $45,960. However, if an employee has access to a qualified, affordable employer sponsored health plan, the employee and their family members do not qualify for the subsidy. Affordable coverage means that the premium for employee only coverage would not exceed 9.5% of the employee’s household income.

Unfortunately, most employers do not know the family income for an employee. If you are offering health insurance and want a safeguard against employees going to the exchange and receiving a credit, you would need to make sure that you do not have any employees paying more than 9.5% of their income for employee only health insurance.

How Can I Tell Whether My Company’s Health Plan Is Compliant?
In order for a plan to meet the minimum standards set by the federal government, it must meet an actuarial value of covering at least 60% of health expenses. There are also Essential Health Benefits that each plan must cover. Those benefits are:

  • Ambulatory patient services, such as doctor’s visits and outpatient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

Many group plans already include a majority of these benefits, with the exception being the pediatric oral and vision care and these additions are expected to increase rates in the market place. Individual health insurance did not have maternity coverage before and this required addition will see increased costs for those policy holders.

If you have questions about purchasing health insurance for your group of 50 or more employees, please call Healthcare Consultants at 713-626-2838 or use our Contact Form

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