Affordable Care Act “Employer Mandate” Delayed Until 2016 For Some Employers

doctor-clipboardBY:  RACHEL D. GEBAIDETIMOTHY C. HAUGHEE

FEBRUARY 12, 2014

The Obama administration has announced that the employer “play-or-pay” mandate portion of the Affordable Care Act (ACA) will not be enforced for some employers until 2016.

Under the employer shared responsibility provisions of the ACA, “large” employers (50 or more full-time equivalents) must offer affordable minimum health insurance coverage to full-time employees (averaging 30 or more hours per week) or pay a substantial penalty.  Previously, this mandate was effective as of January 1, 2014.   Last year, however, the Obama administration announced that the employer mandate would be delayed until January 1, 2015.

In the latest announcement, the Obama administration stated that mid-sized companies (50 to 99 full-time equivalents) will have until January 1, 2016, to comply with the employer mandate.

In addition, the employer mandate for companies with 100 or more full-time equivalents, which is still effective as of January 1, 2015, will be eased.  Those companies must offer insurance to only 70% of full-time employees in 2015.  The requirement that companies offer insurance to 95% of full-time employees will not go into effect until 2016.

The U.S. Treasury Department explained that the decision to delay or ease implementation of the employer “play-or-pay” mandate was a form of “transition relief” to assist employers in adjusting to the requirements of the ACA.

As we previously reported, the employer “play” element of the mandate requires large employers to offer affordable minimum coverage to employees who work 30 or more hours per week.  This means that (1) the premium for individual (employee-only) coverage is no greater than 9.5% of the employee’s total household income and (2) the health plan pays for at least 60% of the costs of the benefits provided under the plan.

The “pay” element of the mandate generally means that a large employer that does not offer coverage and has at least one employee purchasing coverage with a premium tax credit through a federal or state health insurance marketplace, must pay an annual penalty of $2,000 per full-time employee, less the first 30 employees.   If a large employer offers some coverage, but it is neither affordable nor minimum, then the penalty is the lesser of $3,000 per employee who receives a premium tax credit or $2,000 per full-time employee, less the first 30 employees.

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