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, in the form of a premium tax credit, 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 a certain percent 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 $3,240 for 2016 and $3,390 for 2017. The penalty is assessed monthly for each full-time employee receiving subsidized coverage.