Applicable Large Employers can avoid all possible employer mandate penalties implemented by the Affordable Care Act (ACA) if a Qualified Healthcare Plan (QHP) is offered to all of an employer’s full-time employees. There are three requirements that establish a Qualified Healthcare Plan under the Affordable Care Act. A Qualified Health Plan is defined by Section 4980H of the Internal Revenue Code as a plan that meets minimal essential coverage requirements, minimum value requirements, and is affordable based on the employee’s income.
The following defines each individual requirement:
- Minimal Essential Coverage– includes (1) coverage under a specified government sponsored program, (2) coverage under an eligible employer-sponsored plan, (3) coverage under a health plan offered in the individual market within a State, (4) coverage under a grandfathered health plan, and (5) other health benefits coverage that the Secretary of Health and Human Services recognizes under the ACA.
- Minimum Value– an actuarial value of at least 60%. Actuarial value is the percentage of total costs for covered benefits that a plan will cover. Ex: For a plan with an actuarial value of 80%, the employer would be responsible for 20% of the total costs of benefits
- Affordability– coverage that is offered at no more than 9.5% of an employee’s household income.
If an employer offers coverage that meets all three requirements of a Qualified Healthcare Plan to all of their full-time employees then the employer will not incur any penalties. However, due to costs and low participation levels some employers may not be able to offer a Qualified Healthcare Plan to their full-time employees. For alternative options or for questions on Qualified Healthcare Plans, give us a call and stay up to date on the Affordable Care Act by reading our weekly posts on the ACA.