Health Law Consulting Blog

Monday, September 23, 2013

What You Need to Know About the Employer Mandate under PPACA

The Obama Administration recently delayed implementation of the Employer Shared Responsibility provision (Employer Mandate) and accompanying employer reporting requirements under the 2010 Patient Protection and Affordable Care Act (ACA), by one year. The Employer Mandate was set to go into effect on January 1, 2014, but now employers will not be subject to penalties or taxes for failing to offer full-time employees health care coverage meeting certain minimum standards until 2015.

Read on to learn more about the Employer Mandate, reporting and notice requirements.

Overview of the Employer Mandate Provision

The Employer Mandate requires employers with 50 or more “full-time” employees to provide qualifying health insurance that meets certain affordability and “minimum essential coverage” requirements to every full-time employee. To the extent an employer fails to provide the required coverage, the employer will be subject to various penalties and taxes determined on a percentage basis of its full-time employees eligible to receive such coverage.

A large employer is required to report the number of full-time employees, whether the employer offers “minimum essential benefits” under its health plans, and the employer’s share of the total cost of benefits under its health plans. The Internal Revenue Code (IRS) defines a full-time employee as an employee who is employed, on average, at least 30 hours per week, calculated on a monthly basis, which the regulations equate to 130 hours per month. An employee's hours of service include: (1) each hour for which an employee is paid, or entitled to payment, to perform duties for the employer; and (2) each hour of paid leave.

Employers will pay a penalty for one of three occurrences: (i) “no-coverage,” (ii) providing minimum value coverage, or (iii) offering coverage deemed unaffordable. The penalty for “no-coverage” will be $2,000 per year for each non-covered full-time employee in excess of 30. The penalty for failing to provide coverage that meets minimum value or is deemed unaffordable will pay the lesser of $2,000 per year multiplied by the number of full-time employees minus the first 30 or $3,000 multiplied by the number of full-time employees who receive a premium tax credit to purchase coverage through a health insurance exchange. Employees with a family income below 400% of the Federal Poverty Level unable to purchase affordable or minimum valve coverage will generally receive a tax credit.

Reporting Requirements

The information reporting requirement is essential to administering the Employer Mandate. The IRS requires annual information reporting by health insurance issuers, self-insuring employers, government agencies, and other providers of health coverage. Large employers now must report annually certain information relating to the health insurance the employer offers (or does not offer) to its full-time employees. However, since an employer typically will not know whether a full-time employee received a premium tax credit, the employer will not have essential information needed to determine if it has a payment obligation under Section 4980H. The IRS can only determine whether an employer should be assessed a penalty under Section 4980H once it receives the information returns filed by applicable large employers, and the information from employees claiming the premium tax credit for any given calendar year. Therefore, the reporting requirements have been delayed until 2015, to allow employers to better prepare for implementation.

Healthcare Employee Notice Still Required by October 1st

The health care marketplaces will allow individuals and eligible small businesses to purchase health insurance. State health care marketplaces are scheduled to open on January 1, 2014. Open enrollment for health care coverage under state exchanges will begin on October 1, 2013. All businesses will be required to provide employees with notices advising them of the existence of a statewide health insurance marketplace. This mandate applies to all employers engaged in interstate commerce or with at least $500,000 of sales per year. The notice must provide employees with information necessary to make informed decisions about their health insurance.

The notice must include the following:

  1. Explain to the employee in detail what the web-based exchange is all about;
  2. What premium subsidies may be available if an employer’s plan is unaffordable or does not provide minimum value coverage; and
  3. The consequences an employee might incur if he or she decides to purchase a qualified health plan through the exchange instead of employer-sponsored coverage.

Employers must also provide the notice mentioned above to new hires within 14 days after the date of hire.

Feel free to connect with me for more information regarding the provisions that are currently taking effect under the Employer Mandate. I can help you strategize on implementation, conduct employee training on the insurance exchanges, prepare and distribute the required health insurance notices to your current employees and new hires.


U.S. Treasury Department Delays Enforcement of Employer Mandate and Reporting Requirements under PPACA

October 1st Deadline Approaching: Employers Must Provide Notice to Employees of Health Insurance Exchange Options

Section 4980H of the Internal Revenue Code

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