Understanding the PPACA Employer Mandate and Associated Penalties

The US Department of Health & Human Services has recently clarified the employer requirements with respect to offering group medical coverage in 2014.  While a $2,000 per employee penalty (all employees less 30) still applies for employers with at least 50 FTE’s who do not offer any type of group medical coverage, employers have some potential to avoid the full impact of this penalty as long as they offer some type of group medical coverage…even if the plan offered has an actuarial value less than 60%.

In the event an employer offers a group medical plan with an actuarial value that is less than 60%, the applicable penalty is the lesser of:

  • $3,000 for every employee who receives subsidized insurance coverage at a state exchange.
  • $2,000 for every employee (less 30). 

In some cases the “$3,000 per subsidized employee” will actually be the lower penalty.  This will tend to be the case for employer groups with lower earning employees who may choose to not purchase coverage in 2014.  See the helpful employer mandate chart published by CIGNA for more information.

Fortunately, there are a variety of modeling tools available to help employers assess the impact of PPACA.  Tell us about your business.  Will you offer group medical coverage?  Do you understand the impact PPACA will have on your organization?  Have you used a PPACA modeling tool?  Let us know.