This is true irrespective of whether he or she qualifies for some other level of coverage (e.g., self plus dependents, family). Thus, although family coverage might require a larger employee premium, affordability for IRC Sec. 4980H purposes is determined based on the cost of self-only coverage. The act defines household income to mean "modified adjusted gross income of the employee and any members of the employee's family (including a spouse and dependents) who are required to file an income tax return."

2015 affordability requirements: The plan is affordable if the self-only coverage health care plan costs no more than 9.5% of an employee's total household income.
2016 affordability requirements: The threshold of affordability for the plan has been raised to 9.66% of the employee's total household income.

In addition to actually calculating the numbers for each employee, the ACA offers the use of three "safe harbors" as proxies for defining affordability: Form W-2 wages, an employee's rate-of-pay, or use of the Federal Poverty Line.

Employer mandate penalty changes

Employers can be penalized for not providing minimum essential coverage or for having an inadequate health plan. Employers that offer health coverage will not meet the requirements if the following occurs:

at least one full-time employee obtains a premium credit in an exchange plan, and
the plan does not provide minimum essential benefits; the employee's required contribution for self-only coverage exceeds the specified percent of the employee's household income; the employer pays for less than 60% of the benefits.

Neither penalty is triggered unless an employee receives a tax credit for the purchase of health insurance on a state exchange.

Minimum essential coverage penalty changes (4980H(a))

Minimum essential coverage penalties are found in section 4980H(a), which defines the penalty for an employer failing to meet requirements of minimum essential coverage. Initially, the penalty was set at $2,000 per employee but this number is adjusted annually for inflation. The penalty has changed as follows:

Instant Insights /

10 Changes to the Affordable Care Act in 2016

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