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Know Your ACA Rules: The Affordable Care Act Mandate

The Affordable Care Act (ACA), also known as Obamacare, has significantly impacted the American healthcare system since its implementation. One of the ACA’s central components is the mandate to ensure broader health insurance coverage among the population. 

It is crucial for businesses to understand the ACA rules and mandates to provide health insurance coverage to their employees. Non-compliance with these mandates can result in penalties and legal consequences for businesses. The program has many rules, guidelines, and penalties, so it’s imperative to consider all aspects of the mandate when considering health care coverage. 

This article delves into the key aspects of the ACA mandate, addressing common questions and providing essential information about its benefits and services.

The Affordable Care Act Mandate Overview

In 2010, the Affordable Care Act (ACA) was enacted in the United States to improve the healthcare system. 

One of the most essential parts of the ACA was the mandate, which aimed to increase the number of people with health insurance coverage, make healthcare services more accessible, and distribute healthcare costs fairly. 

The individual mandate was a key part of the ACA, requiring most individuals to have health insurance that met the minimum essential coverage standards set by the law. Individuals who did not obtain qualifying health insurance coverage and did not qualify for exemptions were subject to a financial penalty when they filed their federal income tax returns.

However, in 2017, as part of the Tax Cuts and Jobs Act, the financial penalty for not having health insurance was reduced to $0, eliminating the penalty for individuals without repealing the mandate. 

While there is no longer a penalty for individuals who do not have health coverage, large businesses must provide health coverage for employees. 

Employer Mandate Requirements 

The ACA’s employer mandate promotes employer-provided health insurance coverage and ensures that large employers contribute to their employees’ healthcare costs. 

The mandate applies to businesses with 50 or more full-time equivalent employees and has specific requirements that employers must adhere to. 

Let’s take a closer look at the key requirements of the employer mandate under the Affordable Care Act: 

Dependents On An Employee Group Plan

Employers may extend group health insurance coverage to employees’ dependents. Specifics of who can be enrolled as dependents can vary based on the terms of the employer’s health insurance policy and the Affordable Care Act (ACA) regulations. Typically, dependents include a spouse, children, and sometimes domestic partners.

The Affordable Care Act (ACA) has allowed children to stay on their parent’s health insurance plan until they turn 26, regardless of their marital, student, or employment status. 

This is excellent news for families who want to ensure everyone can access healthcare services and financial security.

Full-Time Equivalent Employees

As a business owner, you might have heard about Full-Time Equivalent Employees (FTEs) and how they can impact your responsibilities under the ACA. 

FTEs are calculated by adding up the hours worked by your part-time employees and dividing that by the number of hours a full-time employee works. 

The Affordable Care Act (ACA) defines a full-time employee as someone who works, on average, at least 30 hours per week or 130 hours per month.

Why does this matter? The ACA considers your full-time employees and FTEs when deciding if you are an applicable large employer and need to follow the employer mandate. This means you might need to provide health insurance coverage to your employees. So, understanding how to calculate FTEs is crucial. 

Veteran And Tricare Employees

TRICARE is a vital healthcare program the United States Department of Defense provides. It offers medical and dental coverage to active-duty service members, veterans, and their families. TRICARE coverage is considered Minimum Essential Coverage (MEC) under the ACA.

Suppose an employee is eligible for TRICARE coverage, whether as a service member, veteran, or family member, and they meet the ACA’s mandate requirements. This means that they are considered to have MEC and comply with the ACA’s requirement to have health insurance coverage.

It’s important to note that TRICARE is specific to military personnel and their families and may have different coverage options and rules compared to standard employer-sponsored health insurance plans. 

Employer Mandate Large Businesses 

The Employer Mandate, or the Employer Shared Responsibility Provision, is a critical component of the Affordable Care Act (ACA). It’s aimed at encouraging large businesses to offer their full-time employees and dependents health insurance coverage. 

Large businesses, known as applicable large employers (ALEs), have 50 or more full-time equivalent employees. ALEs must offer Minimum Essential Coverage to at least 95% of their full-time employees and dependents up to age 26. 

In this case, Minimum Essential Coverage refers to health insurance plans that meet the ACA’s minimum requirements. This means the coverage should give employees essential health benefits and provide certain preventive services without cost-sharing.

The coverage offered by ALEs must meet affordability and minimum value standards. Affordability, in this context, means that the employee’s share of the premium for self-only coverage does not exceed a certain percentage of their household income. 

The employer may be penalized if an ALE fails to meet the requirements, and at least one full-time employee receives a premium tax credit or subsidy when purchasing coverage through the health insurance marketplace.

The penalty is calculated based on the number of full-time employees and can be significant. On the other hand, ALEs that do offer adequate coverage may be eligible for certain tax credits and incentives.

Employer Mandate Small Businesses 

The Employer Mandate, or Employer Shared Responsibility Provision, applies to large businesses and impacts certain small businesses. However, small business’ requirements and penalties differ, providing some exemptions and more lenient rules than those applicable to large employers. 

Small businesses with fewer than 50 full-time equivalent employees are generally exempt from the Employer Mandate. Such businesses are not required to offer health insurance coverage to their employees under the ACA’s provisions. 

However, even though they are exempt from the mandate, small businesses can still choose to provide health insurance to their employees through the Small Business Health Options Program (SHOP) Marketplace.

Employer Mandate Penalties

As noted above, ALEs may face a penalty if they don’t offer their full-time employees and dependents health insurance coverage. They might also be penalized if the coverage they offer is deemed unaffordable. 

These large businesses need to make sure that the insurance coverage they offer also provides what’s known as minimum value. 

The specific penalties employers who don’t follow ACA rules can face are subject to change and inflation. These penalties are assessed every month for each full-time employee.

Final Thoughts

The ACA mandate requires almost all individuals to have a minimum amount of health insurance coverage, which you can obtain through an employer plan, an individual plan, or a government program. To ensure compliance with this rule, employers may face penalties if it’s not followed.

We understand that finding the right health insurance coverage can be overwhelming. That’s why we have licensed agents at Enhance Health who can help guide you through the process. 

We know that it’s important for you to have the minimum amount of coverage required by the ACA mandate, and we’re here to make that process as smooth as possible. 

Contact us today to find health coverage that meets your unique needs. 

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