Insurance Coverage Requirement

In 2015, large employers must offer minimum essential coverage to full-time employees and their dependents under an eligible employer-sponsored plan, that is affordable, and that provides minimum value. Dependent coverage must be offered for children under age 26, but does not include spouses, foster children, or stepchildren.


Eligible Employer-Sponsored Plan

An individual can meet the minimum essential coverage (MEC) requirement through an eligible employer-sponsored plan. An eligible employer-sponsored plan means a group health plan or group health insurance coverage offered by an employer to an employee in any of these categories:

  • A governmental plan (within the meaning of section 2791(d)(8) of the Public Health Service Act).
  • Any other plan or coverage offered in the small or large group market within a State.
  • A grandfathered plan in the group market.
  • A self-insured plan.



An employer’s plan will be considered affordable if the employee only contribution towards the premium does not exceed 9.5% of an employee’s household income. If an employer is unable to determine an employee’s household income, an employer may be able to rely upon the following affordability safe harbors at the end of the tax year to avoid tax liability:

  • Form W-2 Safe Harbor: If the employee only portion of the premium for the employer’s lowest cost plan does not exceed 9.5% of the employee’s W-2 wages then the coverage is deemed affordable. Application of this safe harbor is determined at the end of the calendar year.
  • Rate of Pay Safe Harbor: For hourly employees, if the employee only portion of the premium does not exceed 9.5% of an amount equal to 130 hours multiplied by the employee’s hourly rate of pay as of the first day of the coverage period it is deemed affordable.  For salaried employees, the employer would use the employee’s monthly salary rather than 130 hours. An employer may only use this safe harbor if an employee’s wages are not reduced during the calendar year.
  • Federal Poverty Line Safe Harbor: If the employee only portion of the premium does not exceed 9.5% of a monthly amount determined as the Federal Poverty Line (for the state in which the employee is employed) for a single individual for the applicable calendar year, divided by 12, it is deemed affordable.


An employer may only use a safe harbor if it offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that provides minimum value with respect to the self-only coverage offered to the employee.


Minimum Value (MV)

An employer’s plan has to cover at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan. There are four methods an employer can use to determine minimum value:

  • The MV calculator made available by HHS and the IRS provided found here.
  • One of the safe harbors established by HHS and IRS.
  • Through an actuarial certification if an eligible employer-sponsored plan has nonstandard features that are not compatible with the MV calculator and may materially affect the MV percentage.

Through conformance with the requirements for a level of metal coverage (bronze, silver, gold or platinum) defined at 45 CFR 156.140(b) if the plan is in the small group market.

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