Penalty for not providing Health Insurance –
Minimum Essential Coverage (MEC)

Basically the penalty for not providing  Minimum Essential Coverage (MEC) is $2,000/employee.

The penalty if coverage is not affordable 9.86% or does not provide minimum valueBronze Plan is $3k/employee. The details get quite confusing… so follow the links in the right hand column and below to see how it would apply to your group, situation, what you are offering and if any of your employees apply to Covered CA for subsidies.   An Employer only has  to offer affordable coverage – which is less than 9.86% of income for employee coverage and 60% AV  Bronze Plan§4980 H (a)  (b)  to avoid the penalty.

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The IRS is taking the responsibility of enforcing the ACA  ACA Times

How Coverage You Offer (or Don’t Offer) May Mean an Employer Shared Responsibility Payment for Your Organization

Under the Affordable Care Act, certain employers, based on workforce size – called applicable large employers – are subject to the employer shared responsibility provisions. The vast majority of employers fall below the workforce size threshold and, therefore, are not subject to the employer shared responsibility provisions.

If you are an employer that is subject to the employer shared responsibility provisions, you may choose either to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, or to potentially owe an  employer shared responsibility payment to the IRS.  Many employers already offer coverage that is sufficient to avoid owing a payment.

If your organization is an applicable large employer, and you choose not to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, you may be subject to one of two potential employer shared responsibility payments.

More specifically, you may need to make an employer shared responsibility payment to the IRS if you are an applicable large employer and either of these circumstances applies for 2015:

  • You offered minimum essential coverage to fewer than 70 percent of your full-time employees and their dependents, and at least one full-time employee enrolled in coverage through the Health Insurance Marketplace [Covered CA]  and received the premium tax credit.
  • You offered minimum essential coverage to at least 70 percent of your full-time employees and their dependents, but at least one full-time employee enrolled in coverage through the Health Insurance Marketplace [Covered CA] and received the premium tax credit.  A full-time employee could receive the premium tax credit because the coverage that was offered was not affordable, did not provide minimum value, or was not offered to the full-time employee.

For both of these circumstances, the 70 percent threshold changes to 95 percent after 2015.

The terms “affordable” and “minimum value” have specific meanings under the Affordable Care Act that are explained in questions 19 and 20 on the employer shared responsibility provision questions and answers page on  Transition relief for offers of coverage to dependents for 2015 is described in question 33 on the same page.

For more information on the information reporting responsibilities that apply to applicable large employers see IRS’s Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers.

Explanation and solution from Optimed 

to avoid the penalties

OptiMed Health Plans is a national Third Party Administrator, bringing service to its proper dimension. We provide a complete range of benefit products, and administrative services to both corporate and public entities, including the States of Florida and Ohio. We work directly with consultants to simplify, standardize and automate time-consuming human resource functions. Our services can directly impact a client’s bottom line by the freeing up internal resources removing the need for expensive benefit management systems, improving employee satisfaction and thereby increasing employee retention, while helping to reduce cost. We are dedicated to service and reliability. Our staff is professional, knowledgeable and efficient.


video minimum essential coverage
No charge for our broker service and consultation  42 U.S. Code § 18021
CA has an individual penalty
Our webpage on “affordable” coverage

Solutions, Resources & Links

IRS Website on Shared Responsibility Provisions – Mandate Penalties

IRS FAQ’s Shared Responsibility Penalties

Penalty Calculator

NAHU Analysis of Tax Penalties

Affordable Health Insurance 9.5% of employee only cost

Our Webpage on Ben E Lect – offering Self Funded & MEC plans

If you have Employees working over 30 hours/week Notice 2011-36   2012-01  this would include Part Timers  as there is a formula called  FTE Full Time Equivalents there is a requirement under Health Care Reform to purchase Health Insurance coverage for their employees or pay penalties of $2k/employee.

Covered CA will send letters to employers who have employees getting subsidies to warn them…

As of November 2017, employers started being penalized by the IRS for failing to comply with the ACA’s Employer Mandate. Under the Employer Mandate, Applicable Large Employers (ALEs), organizations with 50 or more full-time employees and full-time equivalent employees, are required to offer Minimum Essential Coverage to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value and is affordable for the employee or be subject to IRS 4980H penalties.  Scroll down for more details.

The focus of these initial Letter 226J penalty notices was ACA compliance for the 2015 reporting year. However, the IRS is now laying the groundwork to issue Letter 226J notices for future years, with an anticipated greater focus and significantly higher penalties while the agency continues to issue Letter 226J notices for 2015.

As adjustments to the ACA continue, make sure your organization is in compliance with the law. It is not going away and penalties are still being issued by the IRS.

Determine if you are an

ALE - Applicable Large Employer - over 50 lives - Publication 5208

determine if you are ale applicate large employer

FTE Calculator Health Care.Gov 

Our webpage on FTE Full Time Equivalent and ALE Applicable Large Employer

Guidelines – ACA Full Time Employee Definition

Video Affordable Care Act what is a FTE Full time employee


“full-time employee” means,

For the EmployER Mandates – In general   The term fte with respect to any month, an employee who is employed on average at least 30 hours of service per week. 26 USC § 4980H   Compare with the  definition of employee –  under California AB 1083 to comply with Health Care Reform.

Can you make them 1099 independent contractors and not employees?

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On April 7, 2017 TIGTA issued its, “Assessment of the Efforts to Implement the Employer Mandate under the Affordable Care Act.” In this report, TIGT explained that the IRS has developed an ACA Compliance Validation (ACV) System. It will be used to identify potentially non-compliant Applicable Large Employers and calculate the “A” penalty under the Employer Mandate. The IRS has been developing the ACV system since July 2015 with a scheduled completion date of January 2017. However, “the implementation of the ACV System has been delayed to May 2017.”

The report states that once the systems are in place, the IRS will be able to mass identify noncompliant employers. This will allow the IRS to send notices to noncompliant employers for any and all reporting years.

This means that time is up for employers who were delaying. The current lack of IRS notices for noncompliance with the Employer Mandate does not imply that the IRS does not intend to enforce the Employer Mandate. The IRS will come knocking, they are just running behind schedule. freedom care

See our page on the penalty for not providing MEC – $2k/employee!  

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