Employer Mandate - 50+ and 100+

The "Play or Pay Rule" - Beginning in 2015 for companies with 100 Full Time Equivalent (FTE) employees, and in 2016 for companies with 50 Full Time Equivalent employees, Employers are required to provide health insurance or pay a penalty, which was actually deemed a TAX by the Supreme Court.

There are, in fact, 2 Penalties: Penalty A and Penalty B. Penalty A says that if you are a LARGE EMPLOYER and do not OFFER coverage to at least 95% of your full time employees, then you will pay a penalty. Penalty B says that if you are a large Employer and offer coverage but this coverage is not deemed "Affordable" or does not provide the "minimum value", you will pay a penalty.

How much are the penalties?

Penalty A is $2000 per year for all full time employees, minus the first 30 full time employees. So if you have 60 full time employees and owe this tax, the penalty would be $60,000 ($2000 times 30).

Penalty B is the lesser of Penalty A or $3000 per year times the number of full-time employees who receive a premium subsidy or cost-sharing redcution on the Exchange. There is no dispensation for the first 30.

FTE- This is the total number of full time employees who work on average 30 hours per week PLUS the average of part timers who equal a full time equivalent employee. To reach the second number, add up the total number of Part Time Hours of Service in a given month and divide by 120 hours (the monthly equivalent of 30 hours per week.)

EXAMPLE:
An employer has a restaurant with 18 full time staff that include some managers, bar and wait staff, and another 50 part time workers who average 20-25 hours per week (20 that average about 20 hours a week, and another 25 that average 25 hours a week, for a total hours of 1025 for the group. Divide this by 30 hours a week, and number is 34 Full Time Equivalent. Add this to the 18, and the total is over 52; starting in 2016, this Employer must provide affordable, minimum coverage to the 18 full time employees.

Hours of Service- include any time an employee is paid, including sick time, vacation time disability and holidays.

Affordable- an employee is deemed to have "affordable insurance" if he or she does not pay more than 9.5% of his or her household income towards their own premium (does not include premium for dependent children.) The IRS did come up with an alternative 'safe harbor' option for calculating this (since most employers have no way of knowing Household income of an employee). There are three options, but the most popular is probably the W-2 method.

Minimum Value- This refers to an Actuarial Value that a plan must cover; it is a complicated formula, but basically, the plan must pay at least 60% of the cost of medical services. "Bronze" is the lowest level of coverage for the "metal plans" and has an actuarial value of 60%. (Silver is 70%; Gold is 80% and Platinum is 90%). The only exception to this is for Preventative Services which must be covered at 100% under the law. This includes coverages for Adults, women and children, and covers such items as annual physical, pap smear, well-baby check ups and flu shots.