Employer Mandate

What is the employer mandate?

Under the Patient Protection and Affordable Care Act, businesses with 50 or more full-time-equivalent employees are generally considered applicable large employers. Applicable large employers may be required to offer health insurance that meets certain standards to their full-time employees and their dependents, or potentially face a financial penalty called the employer shared responsibility payment.

The IRS makes employer shared responsibility determinations. Covered California for Small Business can help eligible employers offer qualifying insurance, but it does not determine whether your business owes a penalty.

For detailed guidance on mandate requirements, see IRS Employer Shared Responsibility Provisions.

Does the mandate apply to your business?

Whether the employer mandate applies depends on how many full-time-equivalent employees your business has. A full-time-equivalent employee is not simply a headcount — it is a calculation that combines full-time and part-time employee hours.

How to Meet Health Insurance Requirements

If your business is an applicable large employer, the health insurance plan you offer generally needs to meet a few standards:

1. 1.
   Insurance offered to at least 95 percent of full-time employees and their dependents, meeting Affordable Care Act requirements including coverage of essential health benefits and no lifetime or annual benefit limits.
2. 2.
   Minimum value, meaning the health insurance plan pays for at least 60 percent of the total average cost of covered services.
3. 3.
   Affordability, meaning the employee's premium for their health insurance does not exceed 9.96 percent of their household income.

All health insurance plans offered through CCSB provide minimum essential coverage. If a business offers insurance for employees' dependents, those dependents are ineligible for financial help with a Covered California health insurance plan.

When the Employer Shared Responsibility Payment Applies

The employer shared responsibility payment is only triggered when at least one full-time employee receives a premium tax credit to buy health insurance through a marketplace like Covered California — which happens when your business does not meet one or more of the standards above. You don’t owe a payment simply because employees purchase insurance through Covered California or have Medicare or Medi-Cal.

If the IRS determines your business may owe a payment, it will contact you directly before assessing any liability and will give you an opportunity to respond.

How the Payment Is Calculated

If your business does not offer insurance to at least 95 percent of full-time employees, the payment is assessed monthly and equals the number of full-time-equivalent employees (minus the first 30) multiplied by one-twelfth of $2,000.

If your business offers insurance that does not meet minimum value or affordability standards, the monthly payment is the lesser of: one-twelfth of $3,000 per full-time employee receiving premium tax credits, or one-twelfth of $2,000 per full-time employee (minus the first 30).

Reporting Forms and Employer Notices

Applicable large employers (those with 50 or more full-time employees) are required to complete IRS Form 1095-C (PDF) for each employee and submit a Form 1094-C Transmittal (PDF) to the IRS. These forms report the health insurance offered to employees for the prior year, including the lowest-cost premiums available and months of the year health insurance was offered.

All eligible employees should receive a Form 1095-C, regardless of whether they enrolled in the employer's health insurance plan.

Employers with fewer than 50 full-time employees are generally not subject to these reporting requirements. Their employees may receive a Form 1095-B from the health insurance company instead.

For detailed guidance on employer reporting forms, visit 1095 forms and reporting.

Employer Notices and Response

If the IRS determines that your business may owe an employer shared responsibility payment, it will contact you directly before any liability is assessed. Employers may have the right to respond or appeal. If you get a notice from Covered California, you generally have 90 days from the date of that notice to request an appeal. Employer appeals are handled by the IRS.