What is the “employer mandate” under the ACA?

The employer mandate under the Affordable Care Act (ACA), also known as the Employer Shared Responsibility Provision, requires certain employers to offer health insurance to their employees or face potential penalties. It is aimed at ensuring that larger employers provide affordable health coverage to their workforce. Here’s a breakdown:

Key Elements of the Employer Mandate:

1. Applicable Large Employers (ALEs):
   • The mandate applies to employers with 50 or more full-time employees (or full-time equivalents, FTEs).
   • A full-time employee is defined as someone working 30 hours or more per week, or 130 hours per month.
2. Requirement to Offer Coverage:
   • ALEs must offer minimum essential coverage (MEC) to at least 95% of their full-time employees (and their dependents) to avoid penalties.
   • The coverage must also be affordable and provide minimum value:
     • Affordable: The employee’s share of the premium for the lowest-cost self-only plan cannot exceed 9.12% of their household income (2023 limit, adjusted annually).
     • Minimum Value: The plan must cover at least 60% of total allowed costs of benefits.
3. Penalties for Non-Compliance:
   • If an ALE fails to offer coverage, or the coverage offered is not affordable or does not provide minimum value, penalties may apply if at least one employee receives a premium tax credit through the health insurance marketplace:
     • Penalty A: If no coverage is offered to 95% of full-time employees and at least one employee receives a subsidy, the penalty is $2,880 per full-time employee per year (2023, adjusted annually), minus the first 30 employees.
     • Penalty B: If coverage is offered but is either unaffordable or does not provide minimum value, the penalty is $4,320 per employee who receives a subsidy (2023, adjusted annually), but only for those employees receiving subsidies.
4. Dependents:
   • ALEs must also offer coverage to employees’ dependents (children under age 26), but not spouses.
5. Reporting Requirements:
   • ALEs are required to report their compliance with the employer mandate by filing Forms 1094-C and 1095-C with the IRS and distributing 1095-C forms to employees.

The employer mandate is designed to reduce the number of uninsured individuals by incentivizing large employers to provide health coverage while offering individuals affordable insurance options through the marketplace.