Opinion ID: 223249
Heading Depth: 3
Heading Rank: 7

Heading: Employer Penalty

Text: The Act imposes a penalty, also housed in the Internal Revenue Code, on certain employers if they do not offer coverage, or offer inadequate coverage, to their employees. Id. § 4980H(a), (b). The penalty applies to employers with an average of at least 50 full-time employees. Id. § 4980H(a), (b), (c)(2). The employer must pay a penalty if the employer: (1) does not offer its full-time employees the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan as defined in § 5000A(f)(2); or (2) offers minimum essential coverage (i) that is unaffordable, or (ii) that consists of a plan whose share of the total cost of benefits is less than 60% ( i.e., does not provide minimum value); and (3) at least one full-time employee purchases a qualified health plan through an Exchange and is allowed a premium tax credit or a subsidy. Id. § 4980H(a), (c). The employer penalty is tied to an employer's failure to offer minimum essential coverage. Id. § 4980H(a), (b). Recall that minimum essential coverage is not the same thing as the essential health benefits package. Thus, a large employer may avoid the penalty so long as it offers any plan in the large group market in the state, and the plan is affordable and provides minimum value. Id. § 4980H(b)(1), (c)(3). A small employer's plan, however, must include an essential health benefits package and also be affordable and provide minimum value. 42 U.S.C. §§ 300gg-6(a) (effective Jan. 1, 2014), 18022(a)(1)-(3). The Act also provides tax incentives for certain small employers (up to 25 employees) to purchase health insurance for their workers. 26 U.S.C. § 45R.
The penalty amount depends on whether the employee went to the Exchange because the employer's plan (1) was not minimum essential coverage or (2) was either unaffordable or did not provide minimum value. The penalty translates to $2,000 to $3,000 per employee annually. Id. § 4980H. An employer that does not offer minimum essential coverage to all full-time employees faces a tax penalty of $166.67 per month (one-twelfth of $2,000) for each of its full-time employees, until the employer offers such coverage (subject to an exemption for the first 30 full-time employees). Id. § 4980H(a), (c)(1), (c)(2)(D). This particular penalty applies for as long as at least one employee, eligible for a premium tax credit or a subsidy, enrolls in a qualified health plan through an Exchange. Id. In the unaffordable coverage [57] or no minimum value scenarios, the employer faces a tax penalty of $250 per month (one-twelfth of $3,000) for each employee who (1) turns down the employer-sponsored plan; (2) purchases a qualified health plan in an Exchange; and (3) is eligible for a federal premium tax credit or subsidy in an Exchange. [58] Id. § 4980H(b)(1).
An automatic enrollment requirement applies to employers who (1) have more than 200 employees and (2) elect to offer coverage to their employees. Id. § 218a. Such employers must automatically enroll new and current full-time employees, who do not opt out, in one of the employer's plans. Id. The maximum 90-day waiting period rule applies, however. Id.; 42 U.S.C. § 300gg-7 (effective Jan. 1, 2014).
To reduce the number of the uninsured, the Act provides for immediate coverage for even retired employees 55 years and older who are not yet eligible for Medicare. A federal temporary reinsurance program will reimburse former employers who allow their early retirees and the retirees' dependents and spouses to participate in their employment-based plans. The federal government will reimburse a portion of the plan's cost. [59] 42 U.S.C. § 18002(a)(1), (a)(2)(C). We turn to the Act's fifth component: the Medicaid expansion, which alone will cover millions of the uninsured.