Public Policy

Providing Health Insurance Coverage for Employees

 

Will all employers have to provide health insurance for their employees?

No.  The law does not require employers to provide health insurance for their employees.  However, large employers that do not provide any health insurance or do not provide affordable health insurance to their fulltime employees may face penalties.

How do I determine if I am a large employer?

A large employer has 50 or more Full Time Equivalents (FTEs).  Full time is 30 or more hours per week.  “Equivalents” means employers use a formula for determining whether they have 50 or more FTES that includes both full time employees and part time employees.  See examples of the employer size formula below.

Employer A – NOT a large employer

	number of employees	x	average hours per month	=	total # of monthly hours	/	120	=	Fulltime equivalents
full time	30		---		---		---		30
part time	12	x	80	=	960	/	120	=	8
									Total FTEs = 38

Employer B – a large employer

	number of employees	x	average hours per month	=	total # of monthly hours	/	120	=	Fulltime equivalents
full time	30		---		---		---		30
part time	40	x	100	=	4,000	/	120	=	33.3
									Total FTEs = 63.3

 

Large Employer Penalties

There are two types of penalties large employers might face, one for not offering health insurance coverage if certain conditions are met and one for offering unaffordable coverage. 

Penalty for NON coverage.  Large employers must pay a penalty for every full-time employee that receives a premium credit subsidy for the Health Insurance Exchange.  This amount is equal to $2,000 times the total number of full-time employees (FTEs) minus 30, if at least one FTE is receiving a premium assistance tax credit.  It is important to note that uninsured individuals have a strong incentive to obtain a premium credit subsidy if they qualify, since the law also contains individual penalties for non-coverage. 

Example: You have 60 FTEs and 1 of your FTEs gets a premium credit for the exchange: 
(60 – 30) x (1 x $2,000) = 
(30) x $2,000 = 
$60,000 / 12 months = 
$5,000 monthly penalty

Penalty for “UNAFFORDABLE” coverage.  Large employers must pay a penalty for employees who receive a premium credit subsidy for the Health Insurance Exchange. This amount is the lesser of $3,000 multiplied by the number of FTEs receiving a premium assistance tax credit or $2,000 multiplied by the total number of FTEs.

Example: You have 60 FTEs and 1 of your FTEs gets a premium credit for the exchange:
lesser of (1 x $ 3,000) and  ($2,000 x 60) = 
lesser of ($3,000) and ($120,000) =
$3,000 / 12 months =
$250 monthly penalty

How is unaffordable coverage defined?

Health insurance is unaffordable if: 1) the employee’s required contribution for self-only coverage exceeds 9.5% of the employee’s household income; or 2) if the plan offered by the employer pays for less than 60% of covered expenses.

Are small employers subject to penalties? 

Small employers are not subject to penalties for not providing any health insurance or affordable health insurance for their employees.

What about part time employees?

You must count part time employees for the purpose of determining what size employer you are.  However, no employer (regardless of size) has to provide health insurance for their part time employees (those who work less than an average of 30/hours week).  There are also no penalties for employers if their part time employees obtain insurance through a health insurance exchange.

Will employers be penalized if they hire Medicaid beneficiaries?

No, employing a Medicaid beneficiary will not trigger penalties for non coverage or non affordability.  However when an employer calculates the FTEs they must include all employees receiving Medicaid.   

Are there penalty exceptions for vouchers?

Yes.  Large employers that provider vouchers are not subject to penalties for employees who receive premium tax credits or cost-sharing reductions for coverage in an exchange. It is also important to note that employees may keep difference between a voucher and the cost of coverage. (Vouchers are discussed in more detail later in this issue)

See diagram below to help determine if you might be subject to a penalty.

If I employ more than 200 full time employees are there any special requirements?

For employers with 200 plus employees who over health insurance coverage, they must auto enroll new employees and give notice that they can opt out.  This requirement could go into effect as soon as the Secretary of the Department of Health and Human Services (HHS) issues regulations.