CPA & Business Advisory Blog

Effects of Health Care Reform on Employers

The Patient Protection Act, as amended by the House Reconciliation Act, does not require employers to provide health insurance coverage. However, employers that do not provide minimum essential coverage will be liable for an additional tax. The health care package also requires automatic enrollment in health insurance plans sponsored by large and mid-size employers.

Employers (essentially large and mid-size employers for purposes of the House Amended Patient Protection Act) that fail to offer minimum essential coverage during any month for which a full-time employee has enrolled in a subsidized plan using the premium assistance tax credit or cost-sharing reductions would be liable for an additional tax. That penalty would equal the product of the applicable payment amount (with respect to any month, 1/12 of $2,000) and the number of full-time employees employed by the employer during such month.


The penalty would apply to employers with 50 or more workers but would subtract the first 30 workers from the payment calculation. Businesses with fewer than 50 employees would be exempt from any employer responsibility.


ABC Co. has 51 fulltime employees and does not offer its employees minimum essential coverage. ABC Co. will pay an amount equal to 51 minus 30 (or 21) times the applicable per employee payment amount (up to $2,000 per full-time employee).

Employers offering coverage to employees who qualify for premium assistance tax credits or cost-sharing reductions would also be liable for an additional tax if waiting-period restrictions are imposed. Large employers with extended enrollment waiting periods (generally those exceeding 90 days) would be liable for an additional tax. Generally, if employer provided insurance exceeds 9.5 percent of the employee’s household income or the employer plan has an actuarial value of less than 60 percent, the coverage will not qualify as minimum essential coverage.

Employers and other entities providing minimum essential coverage would be required to fi le information returns with the IRS identifying the individual, the coverage and the amount of premium, if any, paid by the individual. Penalties would be imposed for failure to file an information return.

SourceCCH, a Wolters Kluwer business

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