Employer Mandate

The ACA required all employers with 50 or more full-time workers to pro- vide health insurance or pay a penalty beginning in 2014. The penalty is $2,000 per worker, after the first 30.

Given the difficulties in implementing the SHOP exchanges, the employer mandate was delayed a bit. The penalty for employers with 100 or more workers was delayed until 2015; for those with 50 to 99 workers, it was delayed until 2016. Moreover, employers were only required to cover 70 percent of workers in 2015 and 95 percent in 2016 and beyond.

It was often argued that with the implementation of the employer mandate, firms would drop expensive health insurance coverage and simply pay the penalty. Labor economics suggests this would seldom occur. As we will discuss in chapter 14, workers are essentially paid what they are worth. The compensation includes any health insurance, pensions, and other ben- efits, as well as wages and salaries. So, if an employer simply dropped the health insurance coverage, workers would be made worse off and the best of them would get jobs elsewhere. There is one instance in which a small employer may drop coverage in the face of the ACA, but we will save this for chapter 18, which focuses on small employers.

In addition to the mandate to offer employer coverage, employers are also subject to provisions on the affordability and adequacy of coverage. Affordability means that the out-of-pocket premium contribution may not exceed 9.5 percent of the earning the worker reports on her W-2 tax form. Adequacy means that the actuarial value of the plan must be at least 60 percent of claims costs. Thus, it must be equivalent to a bronze plan. The penalties for these infractions are $3,000 per worker who declines coverage and gets a premium credit in the individual exchange.