ppaca-healthcare-law-guide-nfib

PPACA Mandates
Minimum Essential Coverage and the Individual Mandate Tax
Beginning in 2014, the Patient Protection and Affordable Care Act (PPACA) requires most individuals to
demonstrate and maintain proof of “minimum essential coverage,” which includes: qualified employersponsored
health insurance plans, qualified plans purchased in the individual market, governmentsponsored
health insurance programs (e.g., Medicare, Medicaid), and grandfathered group health plans.
Failure to demonstrate and maintain minimum essential coverage will leave an individual subject to the
individual mandate tax. For an individual, the tax begins in 2014 and will be $95 or 1 percent (whichever
is greater) of household income. In 2015, it rises to $325 or 2 percent. In 2016, it reaches $695 or 2.5
percent. (For families, the figure will be $2,085 in 2016.) After 2016, the amount will rise annually by a
cost-of-living adjustment.
Employer Mandate Penalties
Beginning in 2014, the healthcare law requires “large” employers—businesses with 50 or more full-time
equivalent (FTE) employees—to either offer minimum essential coverage to full-time employees or pay a
penalty. If a “large” employer does not offer minimum essential coverage to full-time employees, and one
or more full-time employees are eligible for a subsidy on the individual exchange (income below 400
percent of the federal poverty level), then the employer will be subject to a $2,000 per full-time employee
penalty (minus the first 30 full-time employees).
If a “large” employer does offer minimum essential coverage to full-time employees, but it is deemed
unaffordable (self-only premiums exceed 9.5 percent of employee income) or not of minimum value (60
percent actuarial value) for certain full-time employees, then the employer will be subject to the lesser of a
$3,000 penalty for those certain full-time employees or $2,000 per full-time employee (minus 30 full-time
employees).
Full-Time Employees
For purposes of defining a full-time employee, PPACA defines a full-time employee as anyone who is
employed an average of at least 30 hours per week (130 hours per month).
Employers may determine current employees’ full-time status by looking back at a standard measurement
period of not less than three but not more than twelve consecutive months to determine whether the
employee average at least 30 hours of service per week (130 hours per month).
Large employers must offer minimum essential coverage to full-time employees or pay employer mandate
penalties, which will be calculated monthly.
Seasonal Employees
Under PPACA, an employer is not considered “large” (and thus, subject to the employer mandate) if the
employer has 50 FTE employees for 120 days or fewer during a calendar year. The Internal Revenue
Service (IRS) and Department of Labor (DOL) continue to provide further guidance through the regulatory
process to determine who is deemed to be a seasonal worker. Through at least 2014, employers are
permitted to use a “reasonable, good faith interpretation” of the term seasonal employee.
Part-time employees
Part-time employees’ hours will be converted into FTE employees for the purpose of determining whether
the employer is a large employer and subject to the employer mandate. Conversion is done by adding up
all of the hours worked by employees who are not full-time employees and dividing the total by 120. For
example, if 6 part-time employees each work 5 hours per week, they will count as if the firm has one
additional FTE employee, calculated monthly (6 employees x 5 hours per week each = 30 hours per week
x 4 weeks = 120 monthly hours/120 = 1 FTE employee).
www.NFIB.com/healthcareplaybook Page 6