Employer Guide & Glossary
ACA EMPLOYER MANDATE
The ACA requires APPLICABLE LARGE EMPLOYERS [ALEs] to offer health insurance coverage to at least 95% of the eligible FULL-TIME EMPLOYEES (and dependents) within the employee population.
These legal obligations are known as the ACA EMPLOYER MANDATE or EMPLOYER SHARED RESPONSIBILITY PROVISIONS [ESRP].
The penalties incurred for not meeting these provisions are known as ACA EMPLOYER SHARED RESPONSIBILITY PAYMENTS [also abbreviated as ESRP].
This health insurance coverage offered by the employer to eligible employees must meet certain minimum standards laid out in the ACA.
It must provide MINIMUM ESSENTIAL COVERAGE [MEC] that is both AFFORDABLE and meets MINIMUM VALUE [MV] expectations.
WHAT IS MINIMUM ESSENTIAL COVERAGE?
As an employer, the health coverage offered eligible employees must have been judged to meet MEC. What is typically considered MEC is covered in IR CODE SECTION 5000A (f).
MEC does not make the offered coverage automatically ACA compliant since it must also be AFFORDABLE and meet MINIMUM VALUE [see below].
In practice, MEC means the plan provides coverage for wellness, preventative services, prescription discounts, and telehealth services at least equivalent to the basic provisions of state-sponsored programs such as MEDICARE and MEDICAID or plans available within HEALTH INSURANCE MARKETPLACE [also known as EXCHANGES].
Organizations offering plans not already recognized as MEC can apply to the CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS) for recognition and should use the process outlined in regulatory guidance issued by the CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT (CCIIO). Essential coverage requirements are aimed at attracting and retaining top talent by also including primary and urgent care visits with low co-pays, and discounted specialist and laboratory services.
WHAT IS MINIMUM VALUE?
To meet ACA EMPLOYER SHARED RESPONSIBILITY PROVISIONS, the health coverage offered by an employer to full-time employees must also provide MINIMUM VALUE coverage, meaning it has an actuarial value of at least 60%.
In other words, the plan must pay for at least 60% of covered benefits — in addition to meeting MEC and AFFORDABILITY criteria.
See Notice 2014-69 PDF for additional guidance regarding whether an employer-sponsored plan provides MINIMUM VALUE coverage if the plan fails to substantially cover in-patient hospitalization services or physician services.
HOW TO DETERMINE AFFORDABILITY:
As stated above, the employer’s offer of coverage to eligible employees must be
AFFORDABLE. The offer is deemed AFFORDABLE if the employee’s required
contribution for self-only coverage in the employer’s lowest cost plan does not exceed a specified percentage of the employee’s household income (even if the employee is enrolled in family coverage).
- NOTE: TY26 AFFORDABILITY affordability has been set at 9.96% of household income for TY26 [up from 9.02% for TY25] or $129.90 a month when using the FPL SAFE HARBOR].
- NOTE: FPL limits are greater for employees in Alaska [$162.27] and Hawaii [$149.32].
Because employers do not know their employees’ household incomes, the ACA permits employers to determine affordability using certain SAFE HARBOR methods as a proxy for household income.
If you have questions regarding the ACA EMPLOYER MANDATE or about any aspect of ACA reporting & compliance, please contact BENEFITSCAPE, the leading ACA specialist.
BBENEFITSCAPE provides best-in-class ACA COMPLIANCE SERVICES, including intelligent, system-agnostic ACA_RegTech, to 1000s of employers of all sizes, in all sectors, across all states, and on all major Payroll and HCM systems.