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Individual Mandate and Employer Responsibility

Individual Mandate

Beginning in 2013, all US citizens and legal residents would be required to purchase health insurance through individually purchased coverage, employer-sponsored coverage, or a federal insurance program. In 2016, the penalty for not maintaining health insurance will be an excise tax of $695 per adult in the household. The tax would be indexed after 2016 and could increase based on inflation. No criminal penalties can be imposed on the failure to pay excise tax. Exemptions are provided for financial hardships, religious reasons, and Native Americans.

Since 2014 individuals have been required to report health coverage on their taxes. If they fail to do so an additional tax will be assessed for the months during which they did not have health coverage. 

Employer Responsibility

Effective in 2014, employers with 50 or more employees would be responsible for either offering health insurance to their employees or paying a fee per employee to help cover the cost of making insurance affordable through the exchange. Employers must pay at least 60 percent of the cost of coverage.

For coverage to be affordable, the employee’s share cannot exceed 9.5 percent of the employee’s family income.

For employers with 50 or more full-time employees (30+ hours), the Act assesses the following fees:

  • $2,000 per employee if the employer does not offer coverage for 70% of employees and their dependents (95% for employers with 100+ employees).
  • $3,000 per employee if the employer does offer coverage, but has employees who are eligible for federal subsidies \ or if the coverage requires that the employee pay more than 9.5% of household income.

The legislation eases the transition into this policy change by exempting the first 30 workers from the payment calculation.

Updates:  

  • On July 2, 2013, the White House announced that it delayed implementation of these employer responsibility provisions until 2015.
  • The U.S. Department of Health and Human Services has issued a model notice that exchanges will send to employers when an employee enrolls in an exchange plan and is found to be eligible for a premium subsidy. Employers offering an “affordable/minimum value plan” will have the opportunity to contact the exchange and verify the plan.