Jane Dotson
In the United States, the Affordable Care Act (ACA) sets out the requirements for employers to provide medical insurance plans to their employees. The ACA's Health Insurance Marketplace offers affordable health insurance options, and federal employees, retirees, and their survivors can choose from a range of health plans, including Consumer-Driven, High Deductible, and Fee-for-Service (FFS) plans. Employers with 50-99 employees are not mandated to offer coverage, but larger companies must offer coverage to at least 95% of full-time employees and dependents. The U.S. Department of Labor (DOL) regulates private self-insured employer-sponsored plans, while the Center for Medicare and Medicaid Services (CMS) enforces federal protections for state and local government self-insured employer plans.
| Characteristics | Values |
|---|---|
| Name of the Act | Affordable Care Act (ACA) |
| Who does it apply to? | Companies with 50-99 employees were exempt from the mandate before January 2016. Employers with 100 or more employees complied if they offered coverage to at least 70% of full-time employees. |
| Coverage | Employers must offer at least one medical plan option that provides "affordable, "minimum value" coverage. |
| Waiting period | Waiting periods must not exceed 90 days. Coverage must begin no later than the 91st day after the hire date. |
| Exemptions | U.S.-issued expatriate plans, insured plans issued in U.S. territories (as of July 16, 2014) |
| Penalties | $2,570 per full-time employee minus the first 30 if coverage is not offered. $3,860 per full-time employee receiving a federal subsidy for coverage purchased on the Marketplace if coverage is offered but does not provide "minimum value". |
| Compliance | All applicable large employers are required to file an annual report. |
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What You'll Learn
The Affordable Care Act (ACA)
The ACA includes a list of healthcare policies that aim to expand access to health insurance. It expanded Medicaid eligibility, created health insurance exchanges, mandated that Americans purchase or obtain health insurance, and prohibited insurance companies from denying coverage due to pre-existing conditions. The ACA also includes tax provisions that affect individuals, families, businesses, insurers, tax-exempt organizations, and government entities. These tax provisions contain important changes, including how individuals and families file their taxes.
The ACA requires insurers to cover a list of essential health benefits, such as emergency services, family planning, maternity care, hospitalization, prescription medications, mental health services, and pediatric care. It also includes premium tax credits and cost-sharing reductions to help lower expenses for lower-income individuals and families. The ACA requires that most insurance plans, including those sold on the Health Insurance Marketplace, cover a list of preventive services at no cost to policyholders. These services include check-ups, patient counseling, immunizations, and numerous health screenings.
The ACA has faced some opposition and efforts to repeal and replace it. President Donald Trump launched such efforts during his first term, stating that the ACA imposes a fiscal burden on states. The Tax Cuts and Jobs Act (TCJA) removed the penalty for individuals not having health insurance in December 2017 and scaled back the outreach program to help Americans sign up for the ACA. However, former President Biden signed an executive order in 2021 to focus on rules and policies that limit Americans' access to healthcare, including pre-existing conditions. The Inflation Reduction Act, signed into law by Biden in August 2022, extended financial assistance for people enrolled in the ACA and expanded eligibility for premium assistance.
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Employer mandate requirements
In the United States, the Affordable Care Act (ACA) mandates that employers with 50 or more full-time employees (or full-time equivalents) must provide health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to the age of 26. This mandate, also known as the employer mandate, applies to employers with 50 or more full-time employees and/or full-time equivalents (FTEs), with employees working 30 or more hours per week considered full-time.
The ACA sets a minimum baseline of coverage and affordability, and employers who do not comply may be subject to penalties. These penalties vary based on the number of employees and whether the employer offers coverage that is not affordable or does not meet the minimum value requirements. For example, as of 2024, a large employer that does not offer any coverage may be subject to a penalty of $2,970 multiplied by 30 less than the total number of full-time employees. On the other hand, if an employer offers coverage that is not considered affordable or does not meet the minimum value requirements, the penalty for 2024 is $4,460 multiplied by the number of full-time employees who receive a premium tax credit in the marketplace, with a cap on the total penalty amount.
It is important to note that these penalties are subject to change over time. For instance, in 2025, the employer mandate penalties will decrease for the first time. The penalty for a large employer that does not offer any coverage will be $2,900 multiplied by 30 less than the total number of full-time employees. Meanwhile, the penalty for offering unaffordable or inadequate coverage will be $4,350 multiplied by the number of full-time employees receiving a premium tax credit, again with an upper limit.
Additionally, the employer mandate no longer applies to insured plans issued in U.S. territories (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands) as of July 16, 2014. However, each territory has the option to enact a comparable provision under its own laws. Large employers in these territories are still required to file annual reports to ensure compliance with any applicable local regulations.
To ensure compliance with the employer mandate, employers must maintain documentation and records. They are also encouraged to be aware of the notice process provided by the Centers for Medicare and Medicaid Services. If an employer believes they have received a notice in error, they have 90 days to file an appeal.
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Coverage for low-income families
In the United States, Medicaid and the Children's Health Insurance Program (CHIP) are the primary sources of free or low-cost health coverage for low-income families. These programs provide health insurance for millions of Americans, including low-income individuals, families with children, pregnant women, the elderly, and people with disabilities.
Medicaid is a federal-state collaboration, with each state's program adhering to federal guidelines while offering distinct coverage and costs. Some states have expanded their Medicaid programs to cover all adults or children below a certain income level, while others have specific rules determining eligibility. Factors such as income, household size, family status, disability, age, and other variables are considered when determining eligibility for Medicaid. Even if one does not qualify based on income, it is recommended to apply as other factors may qualify them for their state's program, especially if they have children, are pregnant, or have a disability.
CHIP, on the other hand, provides low-cost health coverage to children in families who earn too much to qualify for Medicaid. This ensures that children from low-income families have access to healthcare when their family's income exceeds the Medicaid threshold.
Additionally, the Affordable Care Act (ACA) has expanded access to health insurance for low-income individuals and families. The ACA's Health Insurance Marketplace offers more affordable health insurance options, allowing those just above the income level for Medicaid to obtain low-cost private health insurance.
Other antipoverty programs in the US include the Supplemental Nutrition Assistance Program (SNAP), Supplemental Security Income (SSI), housing subsidies, child tax credits, and unemployment insurance. These programs aim to provide economic support and improve the overall well-being of low-income families.
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Federal protections for state and local government plans
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) created a “federal fallback” structure, which allows states to require that insurers implement federal requirements on health coverage. This includes state and local government self-insured plans. The federal government enforces these protections if a state fails to do so.
The Center for Medicare and Medicaid Services (CMS) enforces federal protections against state and local government self-insured employer plans. Non-Federal governmental plans are subject to the provisions of Part A of title XXVII of the PHS Act, including any changes made by the ACA. The CMS can investigate and impose corrective action or penalties for non-compliance with PHS Act requirements.
The ACA has also given Americans new rights and benefits, such as helping more children get health coverage, ending lifetime and most annual limits on care, and allowing young adults under 26 to stay on their parents' health insurance. The ACA altered federal law to create consumer protections that apply across almost all sources of private health coverage.
Some federal standards only apply to employer-sponsored plans governed by ERISA, such as the requirement for employers with 20 or more employees to provide temporary continuation coverage in certain situations (COBRA). This also applies to certain state and local government employers. However, ERISA prevents state law from applying to most self-insured group health plans, limiting state protections for those covered by employer-sponsored plans.
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Federal requirements for private plans
Federal requirements for private health insurance plans apply to large-group, small-group, self-insured, and/or non-group plans. These requirements are codified primarily in three statutes: Title XXVII of the Public Health Service Act (PHSA), Part 7 of the Employee Retirement Income Security Act of 1974 (ERISA), and Chapter 100 of the Internal Revenue Code (IRC).
Federal requirements for private health insurance plans are not applied uniformly across all types of health plans. The requirements can be grouped into the following categories:
- Obtaining coverage: This refers to consumers' eligibility for coverage.
- Keeping coverage: This refers to consumers' ability to maintain their coverage once enrolled.
- Health insurance premiums: This refers to the amounts consumers pay for health insurance.
- Covered benefits: This refers to the benefits that plans cover, including services such as physician visits and prescription drugs.
- Enrollee cost-sharing and plan payment for benefits: This refers to the amounts the enrollees pay (deductibles, coinsurance, co-payments) and the plans pay as enrollees use covered benefits.
- Health care provider interactions: This refers to the plan's interactions with healthcare providers.
- Enrollee information and appeals: This covers the information enrollees need to provide and their options for appealing decisions.
- Federal and public reporting requirements: This refers to the reporting obligations of the plans to federal and public entities.
The federal government has played an increasingly significant role in regulating private health insurance over the past 50 years. The federal pension law, ERISA, passed in 1974, applies to insured and self-insured private employer-sponsored health coverage. It provides similar legal and enforcement mechanisms to protect individuals covered by private group health plans. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) also created new federal requirements and a basic framework for how state and federal laws interact.
States have traditionally been the primary regulators of health insurance, but federal protections have become increasingly important to address consumer concerns around access, affordability, and adequacy. The "federal fallback" structure allows states to continue regulating private coverage while ensuring that consumers have a baseline of federal protections if states fail to enforce them.
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Frequently asked questions
The Affordable Care Act (ACA) is a federal law that gives more people access to health insurance. It establishes Health Insurance Marketplaces, allowing people to find more affordable health insurance options.
The employer mandate under the ACA requires applicable large employers to offer medical insurance coverage to their full-time employees and dependents. The mandate sets minimum standards for the percentage of full-time employees that must be offered coverage and the value of the coverage provided.
Yes, if an employer does not offer coverage or provides coverage that does not meet the minimum value and affordability requirements, penalties may apply. These penalties are based on the number of full-time employees and whether they receive a federal premium subsidy when purchasing coverage on the Marketplace.
Yes, certain situations are exempt from the employer mandate. For example, hours worked by students in federal or state-sponsored work-study programs do not count toward determining full-time employee status. Additionally, the mandate does not apply to insured plans issued in U.S. territories.
