ACA and Employers: Terms to Know about Offers of Health Coverage

Under the Affordable Care Act, certain employers – known as applicable large employers – are subject to the employer shared responsibility provisions. You might be thinking about these topics as you make plans about 2017 health coverage for your employees.

If you are an employer that is subject to the employer shared responsibility provisions, you may choose either 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.

Here are definitions of key terms related to health coverage you might offer to employees:

Affordable coverage: If the lowest-cost self-only only health plan is 9.5 percent or less of your full-time employee’s household income, then the coverage is considered affordable. Because you likely will not know your employee’s household income, for purposes of the employer shared responsibility provisions, you can determine whether you offered affordable coverage under various safe harbors based on information available to you as the employer.

Minimum essential coverage: For purposes of reporting by applicable large employers, minimum essential coverage means coverage under an employer-sponsored plan. 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 percent of the total allowed cost of benefits that are expected to be incurred under the plan.

See IRS.gov/aca for more information on the employer shared responsibility provisions.