Haris Ashley
The Affordable Care Act (ACA), commonly known as Obamacare, has made it mandatory for employers with 50 or more full-time employees to offer affordable health insurance that provides minimum value to their employees and their children until the end of the month in which they turn 26. Employers who do not comply with this mandate are subject to penalties. Employees who find their job-based health insurance too expensive can decline it and opt for an Obamacare plan through the Marketplace. However, they will most likely not qualify for any subsidies or financial assistance and will have to pay the full price for an individual-market plan.
| Characteristics | Values |
|---|---|
| Is employment medical insurance mandatory for employers? | Yes, employers must offer health insurance or pay a penalty. |
| What is the minimum number of employees required for this mandate to apply? | 50 full-time employees, including full-time equivalent employees (FTEs). |
| What is considered full-time employment? | Employees who work 30 or more hours per week. |
| Are there any exemptions to the mandate? | Employers with fewer than 25 full-time employees may be eligible for a Small Business Health Care Tax Credit to help cover costs. |
| Are there any territories where the mandate does not apply? | The mandate does not apply to insured plans in US territories like Puerto Rico, the US Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands. |
| What are the penalties for non-compliance? | Employers must pay $2,570 per full-time employee, minus the first 30 employees. |
| What is considered "affordable" coverage? | Coverage is deemed affordable if employee contributions for self-only coverage do not exceed 9.02% of their household income in 2025. |
| Can employees opt for Obamacare or a Marketplace plan instead? | Yes, employees can decline employer-provided insurance and enroll in a Marketplace plan or Obamacare. However, they may not qualify for subsidies or financial assistance. |
| How does affordability impact an employee's decision to choose a Marketplace plan? | If the employer-provided insurance is not affordable, employees may qualify for savings on a Marketplace plan. Affordability is determined by the IRS and is updated annually. |
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What You'll Learn
- If your employer offers insurance, you likely can keep it and won't need Obamacare
- Job-based insurance is considered affordable if it costs less than 9.78% of your household income
- If your job-based insurance is unaffordable, you may qualify for savings or subsidies
- Employers with 50+ full-time employees must offer affordable, minimum-value insurance to 95% of employees
- If your employer doesn't offer insurance, you may be eligible for a Small Business Health Care Tax Credit
If your employer offers insurance, you likely can keep it and won't need Obamacare
If your employer offers health insurance, you can keep it and won't need to use Obamacare. However, if you prefer, you can decline your employer's insurance and purchase an Obamacare plan through the Marketplace. Obamacare, also known as the Affordable Care Act, was designed for people who are self-employed, retired, or working for a company that does not provide health benefits.
If you have a job-based insurance plan, you won't qualify for savings on a Marketplace plan. Most job-based plans meet the minimum value standard, which requires that the plan covers at least 60% of medical costs and offers substantial coverage of hospital and doctor services. If your employer's insurance is considered "affordable" and meets the minimum value standard, you won't qualify for a premium tax credit if you buy a Marketplace insurance plan. In 2025, a job-based health plan is considered "affordable" if your share of the monthly premium in the lowest-cost plan offered by your employer is less than 9.02% of your household income.
If you decline your employer's insurance, you will likely have to pay the full price for an individual-market plan, as you won't be eligible for a subsidy. You will also lose the benefit of your employer contributing to your insurance costs and paying for premiums on a pre-tax basis.
If you are considering switching to a Marketplace plan, you should review the costs and benefits of both options before making a decision. You can also look into other options, such as Medicaid or the Children's Health Insurance Program (CHIP), depending on your income level and family situation.
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Job-based insurance is considered affordable if it costs less than 9.78% of your household income
The Affordable Care Act (ACA) requires employers with 50 or more full-time employees to offer affordable health insurance to their employees. This is known as the employer mandate. Employers who fail to do so are subject to penalties.
In 2020, job-based insurance was considered affordable if it cost less than 9.78% of an employee's household income. This percentage increased to 9.83% in 2021 and is set to be 9.02% in 2025. Affordability is based on the premium an employee would pay for self-only (individual) coverage. The lowest-cost plan offered by the employer must also meet the minimum value standard, which means that it should pay at least 60% of the cost of covered services.
If an employer does not offer affordable, minimum value coverage, and a full-time employee purchases coverage on the Marketplace and receives a federal premium subsidy, the employer may be subject to a penalty of $3,860 per full-time employee receiving a subsidy, or $2,570 per full-time employee minus the first 30.
If you have job-based insurance or are offered job-based insurance, you will not qualify for savings on a Marketplace plan. If you have a Marketplace plan and are offered job-based insurance, you may no longer qualify for savings on your Marketplace plan even if you do not accept the job-based coverage.
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If your job-based insurance is unaffordable, you may qualify for savings or subsidies
If you have job-based insurance, you won't qualify for savings on a Marketplace plan if the job-based plan is considered "affordable". In 2025, a job-based health plan is considered "affordable" if your share of the monthly premium for the lowest-cost plan offered by your employer is less than 9.02% of your household income. If your employer's plan meets this standard and is considered "affordable", you won't be eligible for a premium tax credit if you buy a Marketplace insurance plan instead.
However, if your job-based insurance is unaffordable, you may qualify for subsidies in the Marketplace/exchange. Eligibility for these subsidies depends on the cost of the employer-sponsored plan and the level of coverage it provides. If the employer-sponsored coverage available to you is no longer affordable or stops providing minimum value, and you are eligible for Marketplace subsidies based on your income, you will qualify for a special enrollment period that will allow you to enroll in a Marketplace plan.
There are two types of subsidies: premium tax credits and cost-sharing subsidies. Premium tax credits are the most common type of subsidy and help you save on your monthly premium. Cost-sharing subsidies, on the other hand, help offset the costs of out-of-pocket expenses such as deductibles and copays. To qualify for cost-sharing subsidies, you must enroll in a silver category plan.
Additionally, the American Rescue Plan Act (ARPA) has expanded eligibility for subsidies, providing them to some people with incomes between 400% and 600% of the poverty line. This may allow individuals and families within these income levels to find more affordable, ACA-compliant plans.
It's important to note that if you have a Marketplace plan and get an offer of health insurance through your job, you may no longer qualify for savings on your Marketplace plan even if you don't accept the job-based coverage. Therefore, it's recommended to get the details before accepting any offers and consider your options carefully when deciding between Marketplace or job-based insurance.
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Employers with 50+ full-time employees must offer affordable, minimum-value insurance to 95% of employees
Under the Affordable Care Act (ACA), employers with 50 or more full-time employees (including full-time equivalent employees) are required to provide health insurance coverage to their full-time employees (defined as those working 30 or more hours per week) or face a penalty. This is known as the employer mandate.
The employer mandate requires that employers offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to the end of the month in which they turn 26. Coverage is considered "affordable" if employee contributions for employee-only coverage do not exceed a certain percentage of an employee's household income (8.39% in 2024 and 9.02% in 2025).
If an employer does not offer coverage, or offers coverage that is not affordable and/or does not provide minimum value, they may be subject to penalties if any full-time employees receive a federal premium subsidy for purchasing individual coverage on a Health Insurance Marketplace. The penalty amount will depend on whether the employer does not offer coverage at all or offers coverage that is not affordable or does not provide minimum value.
Applicable large employers are required to file an annual report that ensures compliance with the employer mandate, including information on all employees who were offered and accepted coverage, and the cost of that coverage on a month-by-month basis.
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If your employer doesn't offer insurance, you may be eligible for a Small Business Health Care Tax Credit
If your employer doesn't offer health insurance, you may want to consider signing up for a Marketplace plan. However, if your employer doesn't provide insurance, they may be eligible for a Small Business Health Care Tax Credit if they meet certain requirements. This credit is designed to help small businesses offer healthcare coverage to their employees.
To be eligible for the tax credit, a business must meet certain size and wage requirements. In terms of size, the business must employ fewer than 25 full-time equivalent employees (FTEs) during the tax year. The number of FTEs includes both full-time and part-time employees, but does not include the business owner, their family members, or seasonal employees who work fewer than 120 days during the taxable year.
For the wage requirements, the business must have an average employee salary of about $56,000 per year or less. There is an even higher tax break for smaller businesses with fewer than 10 employees who are paid an average of $27,000 or less per year. The smaller the business, the bigger the credit.
To qualify for the tax credit, the business must also offer a qualified health plan (QHP) through the Small Business Health Options Program (SHOP) Marketplace. SHOP plans are designed for employers with 1-50 employees. The business must pay at least 50% of the cost of employee-only health coverage, but not for family or dependent coverage.
The Small Business Health Care Tax Credit can make offering health benefits to employees more affordable for small businesses. It is important to note that the credit is only available for two consecutive taxable years, and businesses can carry it back or forward to other tax years.
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Frequently asked questions
Yes, you can decline your employer's insurance and enroll in an Obamacare plan through the Marketplace. However, you will most likely not qualify for any subsidies or other financial assistance.
In 2025, a job-based health plan is considered "affordable" if your share of the monthly premium in the lowest-cost plan offered by the employer is less than 9.02% of your household income.
You can decline your employer's insurance and buy an individual-market plan, but in most cases, you won't be eligible for a subsidy.
Employers with 50 or more full-time employees must offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to age 26, or pay a penalty.
Depending on your income level, you might be able to get them coverage through the Children's Health Insurance Program (CHIP).
