What is the penalty under the Affordable Care Act (ACA) for an employer that offers health coverage that is not considered affordable or does not provide minimum value?

Author: Alison D. Hurt, LeClairRyan

An employer may be subject to a penalty if the coverage it offers does not meet the affordability and minimum value requirements under the ACA and at least one full-time employee receives a subsidy to purchase coverage through a health insurance exchange. An employer's coverage:

  • Is considered affordable if the employee's contribution for single coverage does not exceed 9.56 percent (for the 2015 plan year) or 9.66 percent (for the 2016 plan year) of the employer's chosen safe harbor; and
  • Provides minimum value if it is expected to cover at least 60 percent of a participant's covered expenses.

The law calls for an annual unaffordable/inadequate coverage penalty of $3,000 for each full-time employee who receives a subsidy to purchase coverage through the exchange, not to exceed the no coverage penalty. However, the penalty will be adjusted for inflation. The annual unaffordable/inadequate coverage penalty is $3,120 for 2015 and $3,240 for 2016. The penalty is assessed monthly for each full-time employee receiving subsidized coverage.