Employer Health Insurance Mandate Under the Affordable Care Act

By: Mark Bajalia, Esq. and Samantha L. Prokop, Esq.

healthcareOn March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (ACA) into law, fundamentally reforming the nation’s health care system and spawning a political and legal debate that led all the way to the Supreme Court. The ACA regulates the national health insurance market by directly regulating group health plans and health insurance issuers. All employers who employ 50 or more full-time employees are covered under the ACA’s health insurance mandate.

Although the Obama administration has postponed the implementation of the employer mandate until 2015, all applicable large employers must still offer their full-time employees (and their dependents) health insurance coverage constituting “minimum essential coverage” or be subject to a tax. Generally, the employer responsibility provisions of the ACA are designed to require employers to shoulder a large portion of the burden of providing group health coverage to their full-time employees, either directly through subsidized employer-sponsored coverage, or by funding a portion of the cost of coverage provided through State Insurance Exchanges, created under the ACA.

It is important for employers to determine the number of full-time employees in their organizations. Under the ACA, full-time employees include any employees that averaged 30 hours or more per week.  For existing employees, employers can use a specified look-back period. There is also an initial measurement period for newly hired employees. A defined formula is used to determine the number of full-time employees for an organization. Further, employees are aggregated for corporations that are members of a controlled group of corporations, or where employees are under common control. Employers can use the following formula to determine the number of full-time employees:

  • Calculate:

(a)  The number of full-time employees (including seasonal employees) for each calendar month in the preceding calendar year. This is determined by the look-back/measurement period. How many employees averaged 30 hours per week over this period?

(b) Determine the number of full-time equivalent employees for each calendar month in the preceding year.  This is done by calculating the aggregate number of hours of service (but not more than 120 hours of service for any one employee) for all employees who were not full-time employees for that month, and divide that number by 120.

(c)  Add the numbers in (a) and (b) for each of the 12 months in the preceding year.

(d) Divide the number in  (c) by 12 (if decimal, round down).

Next, employers must ensure that they offer essential health benefits, which include the following: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health, behavioral health, substance abuse treatment services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventative services, wellness services, chronic disease management services, and pediatric services including oral and vision care. Additionally, the coverage must be affordable. Coverage is considered affordable if the employee’s required contribution does not exceed 9.5% of the employee’s Form W-2 wages.[1] “Affordability” also requires that the plan’s share of the actuarial value of covered benefits (i.e. the amount that the plan would pay toward the actuarially projected cost of covered services) is not less than 60%.

To ensure compliance, the ACA requires every employer to report the following information to the Treasury: (1) a certification as to whether the employer offers its full-time employees the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, (2) the length of any waiting period, (3) months of coverage available, (4) the monthly premium for the lowest cost option for each enrollment category, (5) the employer’s shared costs, and (6) any other information the Treasury may require.

The IRS also requires employers to report the aggregate cost of employer-sponsored health coverage on employees’ W-2s. Employers that are not in compliance with the employer mandate of the ACA are subject to a tax of $166.67 per month (or $2,000 annually) for each full-time employee. On January 2, 2013, the IRS released proposed regulations to address numerous issues regarding employers’ shared responsibility for health coverage under the ACA. Among other things, the proposed rule provides that an employer will be treated as offering “substantially all” of its full-time employees coverage for a calendar month if it offers coverage to all but 5% of its full-time employees. If the employer meets the “substantially all” test, the employer will only be subject to penalties for those full-time employees to which the employer did not offer coverage.

It is imperative that employers enact proactive measures to determine whether an employee is full-time or part-time for the purpose of ACA, and thus eligible or ineligible for coverage. If you have any questions regarding the health insurance mandate, please contact Mark Bajalia, Esq. (904) 366-7302, or Samantha Prokop, Esq. (330) 253-3766,

mark bMark Bajalia is a shareholder in the Jacksonville office of Brennan, Manna & Diamond. Practicing for almost 20 years, Mark focuses his practice on business law, commercial litigation and health care. Mark is the practice group leader for health care in Jacksonville and represents physicians, hospitals and other health care providers. He is rated AV Preeminent by Martindale Hubble and has been recognized as a Super Lawyer and one of Florida’s Legal Elite Florida Trend Magazine.


prokop1Sam is an associate practicing in BMD’s Business and Corporate Healthcare Law practice groups.  Sam focuses her practice on revenue enhancement strategies for clients including strategic alignments, mergers, acquisitions, and contract matters. On the healthcare side, Sam has experience as a Risk Manager for a large healthcare system in Ohio and assists clients in compliance matters and overpayment appeals in addition to revenue enhancement strategies.  Sam’s goal is to help clients work smarter, not harder, and keep more of the money they earn through creative strategies in an ever-changing legal and regulatory environment.

[1] The IRS has indicated this figure may be adjusted after 2014 to reflect rates of premium growth relative to growth in income, and after 2018 to reflect rates of premium growth relative to growth in consumer price index.

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