Health care law's employer requirements

WASHINGTON (AP) -- Requirements that medium-sized and large employers offer insurance coverage or face fines are one of the most complicated parts of President Barack Obama's health care law.

While most of the estimated 160 million Americans with job-based coverage will not see not see major changes when the law takes full effect next year, the so-called employer mandate will be important to millions of workers, particularly in low-wage industries.

The Affordable Care Act, as the law is known, actually has two mandates on employers, part of "shared responsibility" provisions to ensure that companies keep offering coverage. Think of them as the big stick and the smaller stick.

Employers that don't offer coverage at all face the big stick. Those that offer substandard or inadequate coverage face the smaller stick.

The penalties apply to companies with 50 or more full-time employees, defined as workers averaging 30 hours a week or more.

There is no coverage mandate — or penalty — for smaller businesses. Also, for businesses of any size, there is no penalty if their workers are poor enough to be eligible for Medicaid.

The government expects to collect $130 billion in penalties over a decade.

The first penalty — the big stick — applies to medium-sized and large companies that don't offer coverage. If just one of their full-time workers receives tax credits to purchase coverage in new insurance markets next year, the company faces a fine of $2,000 multiplied by its total number of full-timers, minus the first 30.

For a company with 100 employees, the fine would be $140,000 in 2014, according to examples provided by the National Retail Federation.

The second penalty — the smaller stick — applies to companies offering policies unaffordable or that fail to meet basic standards for adequate coverage. It's unaffordable if the premiums exceed 9.5 percent of an employee's income.

Companies whose health plans fail either test of affordability or adequacy would pay $3,000 for each employee who gets a tax credit in the new insurance markets.

Initially there was widespread speculation that many employers would drop coverage and opt to pay the fines instead, but that talk seems to have died down. A new Mercer survey of companies with 500 or more workers finds only 7 percent plan to stop offering health benefits.