Federal healthcare reform, also known as the Affordable Care Act (ACA), made several changes to group health plans. Businesses with 51 or more full- time equivalent (FTE) employees will face a penalty if they do not offer affordable minimum levels of healthcare coverage to their employees.

Here’s what you need to offer your employees:

• Health plan coverage for employees and their dependents (children under 26, but not spouses).
• A plan that meets the federal Minimum Essential Coverage requirements.
• A plan that meets the minimum actuarial value of 60 percent, so employees will only cover 40 percent of the costs of their benefits.
• A plan where the lowest cost option requires employees to contribute no more than 9.12% of their household income for self-only coverage.
• The option for the employee to decline coverage that doesn’t meet minimum value or is not affordable.
• Coverage for at least 95 percent of your employees.

Pay or Play Penalty Calculations?

What’s the penalty if you don’t meet the ACA requirements? Under the pay or play rules, an applicable large employer (ALE) is only liable for a penalty if at least one full-time employee receives a subsidy for Exchange coverage. Employees who are offered affordable, minimum value (MV) coverage are generally not eligible for these Exchange subsidies.

If you DO NOT offer minimum essential coverage, you will be required to pay an annual penalty of $2,880 per full-time employee (FTE)
minus 30 employees. You will not face a penalty because an employee receives a tax credit for dependent coverage.

If you DO offer minimum essential coverage, you may still have to pay a penalty if 1 or more of your full-time employees receives a tax credit or cost-sharing subsidy through the exchange. This could happen if the coverage is “unaffordable” to your employee (cost share more than 9.12% of income for 2023).

The 2023 4980H(b) penalty, or Employer Shared Responsibility Penalty for failure to offer coverage that meets affordability and Minimum Value (MV), $4,320, per employee. This is the penalty amount if an employee is assessed if the 4980H(a) does not apply.

This penalty is assessed on a monthly basis for every full-time employee that did not receive an offer of coverage or received such an offer, but the offer was either unaffordable or did not provide MV or both AND the employee received a PTC for that month.

If you would like to learn more about how we can help manage your employee health benefits program, give us a call at (206) 985-2525 or request a quote.