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Obamacare: Shared Responsibility

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by Stacy Malone, Marketing Intern
So yes, the Employer Mandate has been delayed. However, you still have big decisions to make now. You first need to determine whether you’re considered a large or small employer under Obamacare, then you need to decide whether to Pay or Play.

To “pay” means that a large employer will not provide insurance and will choose to pay the penalty. To “play” means that a large employer will choose to provide minimum essential coverage to full-time employees.

Large employers will have to start providing affordable minimum essential coverage to their full-time employees. A health care plan is affordable if an employee pays less than 9.5% of their annual household income, based on the single rate. A “large” employer is an employer that has more than 50 full-time employees and “full time equivalents”. Whether or not you’re a “small” or “large” employer is decided each calendar year. So if you have more than 50 full-time and full-time equivalent employees in 2014, you are a “large employer” in 2015. If an employer fails to provide adequate health coverage to their full-time employees, they may be subject to the shared responsibility penalty.
Whether an employer is subject to the shared responsibility penalty depends largely on whether they offer health insurance to some or all full-time employees. If a large employer doesn’t offer health coverage or offers coverage to less than 95% of its full-time employees and at least one full-time employee receives a tax credit to help buy insurance from the Exchange, then that employer will receive a penalty equal to the amount of full-time employees (minus 30) multiplied by $2,000 a year. So if a large employer that has 70 full-time employees were to receive this penalty, they would end up paying $80,000 a year. (The math: 70 full-time employees minus 30 full-time employees equals 40 full-time employees. 40 full-time employees multiplied by $2,000 equals $80,000.) This is the “pay” part of “pay or play”.
However, if an employer does offer coverage to at least 95% of its full-time employees and one or more full-time employees receives a tax credit to help pay for coverage in the Exchange, the employer may have to pay a number equal to the number of full-time employees receiving a tax credit multiplied by $3,000 a year. To ensure that employers who do provide coverage aren’t being penalized more than those who don’t, the penalty cannot be more than the number of full-time employees minus 30 multiplied by $2,000 a year. This is the “play” part of “pay or play”.

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