Key ACA Terms
An employer-sponsored plan is group health insurance. Employer-sponsored plans can include a range of plan options including HMO and PPO as well as additional coverage such as dental, disability, and life. Some coverage under employer-sponsored plans must be reported on employees’ W-2s. For a list of what to report on the W-2 visit, Form W-2 Reporting of Employer-Sponsored Health Coverage.
Self-Insured Group Health Plan
Some employers choose to operate their own health insurance plan instead of going through an insurance carrier to purchase a fully-insured plan. The employer pays a third-party administrator to manage the plan while keeping the premium and paying the cost of claims and administration themselves.
Applicable Large Employer (ALE)
An employer that had an average of at least 50-full time employees (include full-time equivalent employees) during the prior year. For more information, visit www.IRS.gov.
Minimum Essential Coverage (MEC)
Qualifying health care coverage under an employer-sponsored plan. This includes:
- Group health insurance coverage for employees under a governmental plan, plan offered in the state’s small or large group or grandfathered health plan)
- Self-insured group health plan for employees
- COBRA coverage
- Retiree coverage
Individual health coverage:
- Insurance you purchase directly from an insurance company
- Insurance purchased through the Marketplace
- Insurance provided through a student health plan or university-funded student health plan
- Catastrophic plans
Coverage under government-sponsored programs:
- Most Medicaid coverage
- Children’s Health Insurance Program (CHIP)
- TRICARE coverage (most types)
- Comprehensive programs offered by the Department of Veterans Affairs
For a complete list of minimum essential coverage, visit: Individual Shared Responsibility Provision
Employer Shared Responsibility
ALEs must either offer affordable minimum essential coverage that provides minimum value to their full-time employees (and dependents) or potentially make an employer shared responsibility payment to the IRS if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges, also called a Health Insurance Marketplace (Marketplace).
The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions.” The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions. For more information, visit www.IRS.gov.