How To Know If Coverage Meets ACA Requirements
Under the Affordable Care Act, employers with 50 or more full-time or full-time equivalent employees – called applicable large employers, or ALEs – are subject to the employer shared responsibility provisions. The vast majority of employers fall below the ALE threshold and are not subject to the employer shared responsibility provisions.
If you are an ALE, you may choose to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, or to potentially owe an employer shared responsibility payment to the IRS. Many employers already offer coverage that is sufficient to avoid owing a payment.
Here are definitions of key terms to help you understand these requirements:
Affordable coverage: If the cost of your least-expensive employee-only only health plan is 9.5% or less of your full-time employee’s household income, the coverage is considered affordable.
Because it is likely that you will not know your employee’s household income, you can also determine whether the coverage you offer is affordable based on various safe harbor provisions that are based on information that is available to you as the employer.
Minimum essential coverage: For purposes of reports ALEs must file with the IRS, minimum essential coverage means coverage under an employer-sponsored health insurance plan that meets the standards of the ACA. It does not include fixed indemnity coverage, life insurance or dental or vision coverage.
Minimum value coverage: An employer-sponsored plan provides minimum value if it covers at least 60% of the total allowed the cost of benefits that are expected to be incurred under the plan.
A minimum value calculator, developed by HHS is available online to determine if a plan with standard features provides minimum value.
Plans with nonstandard features are required to obtain an actuarial certification for the nonstandard features. Certain safe harbor plan designs that will also satisfy minimum value.
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