With health care reform, a common question is does my employer have to provide health insurance? Not necessarily. The health care reform law, called the Affordable Care Act (ACA), requires certain employers to purchase health insurance or else pay a tax penalty.
Q: Does my employer have to provide health insurance?
A: As of January 1, 2015, employers with 50 or more full time equivalent (FTE) employees are required to provide health coverage to full-time employees or else pay a tax penalty. This is commonly referred to as the employer mandate.
Employers with less than 50 FTE employees are not subject to these tax penalties for not offering health insurance coverage, although if your employer does provide health insurance they might be eligible for tax credits.
Even with the tax penalty, many employers with more than 50 FTE employees will calculate the cost of not providing health insurance and find it is more cost-effective to offer an alternative health insurance solution such as a defined contribution plan. For example, they may choose to send employees to their state health insurance exchanges. Employers would then provide a Healthcare Reimbursement Plan to reimburse employees for a portion of their policy.
Q: If my employer doesn't provide health insurance, do I have to buy health insurance?
A: As of January 2014, health care reform requires most individuals to either be covered under health insurance, or pay a tax penalty.
Coverage can include employer-provided insurance, individual health insurance, Medicare or Medicaid. The tax penalty phases in over three years and becomes increasingly severe. In 2014, the penalty will be 1 percent of annual income or $95, whichever is greater. By 2016, the penalty will be 2.5 percent of income or $695, whichever is greater. This means that if you do not have coverage in 2014, you will be required to pay a tax penalty when you file your taxes at the end of the year.
The total penalty for the taxable year cannot exceed the national average of the annual premiums of a bronze-level health insurance plan offered through the health insurance marketplaces. Health insurance plans will provide proof of coverage for their customers. Several groups are exempt from the requirement to obtain coverage or pay the penalty, including:
People who would have to pay more than 8 percent of their income for health insurance
People with incomes below the threshold required for filing taxes (in 2012, $9,750 for a single person and $27,100 for a married couple with two children)
People who qualify for religious exemptions
People who are incarcerated
Members of Native American tribes
If you do not have insurance and do not fit into one of these categories, then you will likely pay a tax penalty.
In summary, does your employer have to provide health insurance? Not necessarily. Whether they pay a tax penalty for not offering health insurance depends on their size.
What questions do you have? Let us know in the comments.