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and even one full-time employee receives a premium tax credit through the public Health
Insurance Marketplace, then the penalty is equal to $2,000 multiplied by the number of
full-time employees. A different, generally lesser penalty applies when an employer offers
minimum essential coverage, but the coverage does not meet minimum value requirements
or is considered unaffordable. In this case, the employer will have to pay $3,000 for each
employee who purchases subsidized coverage. With the $3,000 penalty, the employer has
offered coverage, but the coverage does not satisfy the minimum value and affordability tests.
The total amount of the $3,000 penalty cannot be greater than the total penalty for failing to
offer any coverage.
Figure 9:
Scenario
Calculation
Example
Employer fails to offer
minimum essential coverage
to substantially all full-time
employees and their dependents
$2,000 X (Total number of
full-time employees - first 30
employees)
Employer with 51 full-time
employees:
$2,000 X (51-30) = $42,000
Penalty is: $42,000
Employer offers minimum
essential coverage that is either
unaffordable or does not satisfy
minimum value requirements.
Lesser of (a) and (b)
(a) $2,000 X (Total number of
full-time employees - first 30
employees)
(b) $3,000 X (The number of
full-time employees receiving
a subsidy)
Employer with 51 full-time
employees and 10 full-time
employees obtain tax credits:
(a) $2,000 X (51-30) = $42,000
(b) $3,000 X 10 = $30,000
Penalty is: $30,000
Dependent Coverage and Cost
The employer shared responsibility payment provision does not include a requirement to cover
spouses. However, employers are required to make coverage available to dependents up
to 26 years of age or face a penalty. In 2013, health care costs are expected to increase
per employee by 5.3 percent (0.6 percent lower than in 2012). The average expected un-
subsidized costs of individual coverage is projected at $11,607 ($8,911 employer share, and
$2,696 employee share).
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Minimum Value and Actuarial Value
Actuarial value is relevant under health care reform for a number of purposes. The minimum
value standard under the employer shared-responsibility requirement requires that the plan
pay at least 60 percent of covered expenses. If a small employer purchases group health
insurance (either through the SHOP Marketplace or through a private marketplace), health
care reform requires that the plan have a minimum actuarial value of at least 60 percent (they
may also have an actuarial value of 70, 80, or 90 percent).
Currently, the employer market offers an average of 83 percent actuarial value,
4
but often
employees are not aware of the actuarial value of their health care coverage or their
