1. ACCOUNTABLE CARE ACT
EMPLOYER SHARED
RESPONSIBILITY COMPLIANCE
ROADMAP FOR HEALTH
PLANS
ACA Insurance Mandate Employer Compliance Guide
Roberta E. Winter, MHA, MPA, healthpolicymaven.com
healthpolicymaven@gmail.com
Abstract
Much of the focus on the Accountable Care Act and the Public Health Services Act mandates for
employer medical plans address compliance but do not discuss opting out. This guide provides
analysis of both outcomes so employers and their representatives can make informed decisions.

2. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 1
ACA Employer Responsibility Compliance Roadmap for Health Plans
Table of Contents
P.2 Author Credentials
P. 3-5 Explanation of the Accountable Care Act 2015 Medical Insurance
Mandate for Employers
P. 6-7 Instructions for Determining Includable Employees, Measuring Plan
Participation, and Contribution Testing
P. 8-10 Calculation of Penalties
P. 11 Conclusion
P. 12 Bibliography
P. 13-17 Opt Out Kit for Employers-This is provided under separate cover for
purchase and is not part of the whitepaper, which is offered for free.
The compliance kit includes election forms, an interactive presentation,
and an employee notification poster.

3. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 2
Author Credentials
Roberta E. Winter is a veteran of the health insurance industry, having spent over fifteen years
negotiating health & welfare contracts for private employer benefit plans. Winter owned her own
insurance brokerage firm for eight years, before returning to school in 2002. She completed work on her
Master of Health Administration degree from the University of Washington, School of Public Health and
Community Medicine in 2004. Her studies focused on health policy and her graduation capstone project
was developing a radio broadcast called, “Increasing the Engagement of the Public in Understanding
Health Systems.” In 2007, she completed work for her Master of Public Administration from the
University of Washington, Evans School of Public Affairs. In addition to these formal education
programs, she also completed a Master of Science in Management, for financial institutions, from the
American College in Bryn Mawr, Pennsylvania in 2000. Winter maintains her life and health insurance
license in Washington State, but does not sell or provide insurance plan advice. She has published more
than fifty articles on healthcare policy and regulatory issues since 2007. She has also served as a peer
reviewer for academic articles and a technical writer for health care and other scientific publications. In
2013, her first book Unraveling U.S. Healthcare-A Personal Guide, was published by Rowman and
Littlefield, a respected institutional book publisher. For more information on her work, you may read her
monthly column, Straight Talk on Healthcare or follow the healthpolicymaven through social media.
Winter still performs healthcare consulting for policy analysis and process improvement through her
corporation, Praevalere Inc.

4. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 3
Accountable Care Act Employer Responsibility Compliance Roadmap for Health Plans
Beginning in 2015, businesses will have to meet certain standards for health care plans in the United
States and this is your roadmap for compliance to the employer insurance mandate.
Health Plan Provisions for All Employers with Fifty or More Workers
Public Health Services Act, Section 2708 stipulates that health plans offered by employers with fifty or
more employees are subject to these standards:
Waiting period maximum is ninety days before an employee is enrolled in the medical plan
Children who are still dependents of their parents are able to remain on parent’s coverage to age 26
Pre-existing conditions clauses are not allowed
Benefit Specifications
Though the Patient Protection and Affordable Care Act mandates that employers provide medical
coverage to employees, the specific benefit design specifications mostly apply to traditionally insured
health plans. However, neither self-insured nor fully insured medical plans may exceed the ninety day
waiting period limit, they must cover adult children to age 26, and finally, pre-existing conditions
clauses which restrict insurance coverage are not allowed. Minimum health benefits, which are part of
the insurance mandates for essential coverage, also apply to self-insured medical plans.
Penalties for noncompliance
If a self-insured plan fails to comply with the provisions of the Public Health Services Act, employees
designated as highly compensated individuals could lose the tax favored status of their benefits, which
means they would have to pay tax on their health plan benefits. If an insured group health plan fails to
comply with the provisions of section 105-H of the Public Health Services Act, an excise tax may be
exacted. 1
If a self-funded plan does not offer a medical plan that meets the minimum for essential
health benefits, an excise tax may be demanded, starting in 2015.
Safe Harbor Provisions
Safe harbor provisions include foreign employees, or those working in other countries. The PHSA and
the ACA applies to employees working within the confines of the United States and its territories.
Compliance Testing
To comply with the federal regulations regarding the provision of employer provided health insurance
plans, continue to the next section and work through the exercises to determine your eligibility and if
you have to pay a penalty for a noncompliant plan.
1
Internal Revenue Service Notice 2011-1 and found online at: http://www.irs.gov/pub/irs-drop/n-11-01.pdf
(Service November)

5. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 4
Mandates Effective in 2015
I. Determining the Number of Eligible Employees for the Participation Test
The first thing any employer needs to assess is whether or not the 50 employee standard applies. Note
that the penalty for noncompliant or nonexistent medical plans is waived for employers with less than
100 employees for 2015. First you must determine which employees are included in the criteria for
insurance eligibility.
Figure 1
Determining full-time employee equivalents requires an algorithm and here are the steps in more detail:
Have you had fifty or more fulltime or fulltime equivalent employees in the prior year? If you have a lot
of part-time employees or if you own multiple corporations which are part of a controlled group, you
still need to do this analysis.
Determine your fulltime employees, which for purposes of the ACA are those working at least 30 hours a
week. The language “on average” is used, but that can be a bit dicey, I suggest using a quarterly look-
back.
Next, determine your fulltime equivalent employees, which is defined as anyone who has worked at
least twenty hours in a month. The ACA also allows employers to use the 130 hours-per-month of work
definition to determine fulltime status. Take the number of hours the employees worked in this
category and divide it by the number of employees to arrive at your sum.
Determine all other employees, regardless of the hours worked and divide that sum by 120
To assess whether or not your firm is subject to the fifty employees or more ACA compliance mandates,
add the sums of the fulltime employees, the fulltime equivalents, and the sum for the “other
employees” criteria. If this total equals or exceeds fifty, you must comply with the federal mandates of
the Affordable Care Act. This total also determines which provisions of the Public Health Services Act
apply and the various sections of the Internal Revenue Service Code.
Determine if You Have 50 Employees
1st-How Many Employees Work an Average of 30 hours a Week
2nd-Determine Fulltime Equivalent Employees-Anyone Working at Least 20 Hours a Month
3rd-Divide the Number of Hours Worked by the Number of Fulltime Equivalent Employees
4th-Determine the Number of Other Employees By Dividing the Total of Employees Left by 120
5th-Add the sums of the Fulltime, the Fulltime Equivalent, and the Other Employees Criteria.
If 50 or more-Your Firm Must Comply with the Insurance Mandates or Pay a Fine per Eligible Employee

6. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 5
II. Determine If You Will Be Assessed a Penalty for Not Meeting the Insurance Mandates
Health Plan Contribution Tests
W-2 Test
The first test to determine if your firm owes a penalty under the Public Health Services Act and the Affordable Care
Act insurance mandates is the W-2 test, which is of course, based on what you pay your employees. If your health
plan premium contribution falls below 9.5% of employee contribution you have met the test.
Figure 2
Look-back Method
This type of test is just another way to assess if your plan has met the affordability standard and is
within 9.5% of employee compensation. To determine if your firm owes a penalty under the PHSA is to
take the employee’s rate of pay at the beginning of the year and assume 130 hours of service a month,
which is effectively 30 hours a week, using an average of slightly more than 4 weeks per month.
For employers choosing to use the “look-back” period, this can be done annually, semi-annually, or
quarterly. It is best not to use a monthly calculation as it takes a month to assess eligibility, especially for
new employees, so administrators wouldn’t know who is eligible until the end of the month and
insurance plans require enrollment at the beginning of the month.
Stability Period
The government has coined a new phrase, called the stability period, which means once the initial
eligibility is determined for employees, there is a period of time where the employees must remain on
the plan, if they remain active employees. So if an employer chooses an annual measurement period,
eligible employees will be allowed to remain on the plan for 12 months. If an employer opts to check
eligibility every three months under the measurement period criteria, then the stability period will only
1.Use the W-2 Method to
Determine Employee
Income
2. Does the Employee's
Contribution to the Cost
of the Health Plan Exceed
9.5% of their Pay?
3. If Yes, You Owe A
Penalty
4. There are 2 Types of
Penalties-A and B; A
Could Be as High as
$3,000 per Employee
5. The B Penalty, Which is
Less, Only Applies to
Workers Who Opt For a
Federal or State Insurance
Exchange Plan

7. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 6
be for three months. This effectively means that an employee’s health plan inclusion status could
change every quarter.
Federal Poverty Level Method
The federal poverty level method of assessing health plan compliance stipulates that as long as the
employee is not expected to pay more than 9.5% of his or her income for health insurance, the plan is
acceptable. This is different than the qualified federal and state insurance exchange standards which
state that 8% of adjusted gross income is the maximum an employee is expected to pay for health
insurance. This table shows the 2014 federal poverty level standards in the 48 contiguous states. Income
levels qualifying for poverty status are higher in Alaska and Hawaii.2
(U.S. Department of Health &
Human Services, n.d.)
2
(Health & Human Services Agency 2015)
Federal Assistance forMedical Insurance Purchasing
Federal Subsidies to buy medical in the insurance exchanges impact people earning between 133%-400% ofthe federal poverty level
FPL
Income
Under
133%
Equalto
133%
Equalto
133%
Equalto
133%
Equalto
133%
Equalto
133%
Equalto
133%
Equalto
133%
Equalto
133%
Up to
400%
Up to
400%
Up to
400%
Up to
400%
Up to
400%
Up to
400%
Up to
400%
Up to
400%
Base
income
level $15,654 $15,654 $21,187 $26,720 $32,253 $37,785 $43,318 $48,851 $54,384 $47,080 $63,720 $80,360 $97,000 $113,640 $130,280 $146,920 $163,560
Family size All 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8
Governme
nt subsidy 98.00% 97.00% 97.00% 97.00% 97.00% 97.00% 97.00% 97.00% 97.00% 90.50% 90.50% 90.50% 90.50% 90.50% 90.50% 90.50% 90.50%
Av/yr/
insurance
premium/fa
mily $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102 $7,102
Indiv/net
cost/yr $72 $108 $343 $675 $675 $675 $675 $675 $675 $675
Family net
cost/yr $142 $213 $213 $213 $213 $213 $213 $213 $213 $675 $675 $675 $675 $675 $675 $675 $675
Monthly
Cost 11.84$ 17.76$ 17.76$ 17.76$ 17.76$ 17.76$ 17.76$ 17.76$ 17.76$ 56.22$ 56.22$ 56.22$ 56.22$ 56.22$ 56.22$ 56.22$ 56.22$
Notes:
Poverty levels are based on 2015federalguidelines and are forthe 48contiguous states.
Insurance estimates are fromKaiserFoundation's 2010survey ofpeople who bought individualinsurance contracts.The average price paid fora single individualwas $3,600,family insurance price is in the chart.
RegionalInsurance Exchange Premiums willprobably be higherthan these costs because ofmandated coverage levels.

8. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 7
How to Avoid an Employer PHSA Shared Responsibility Penalty
The good news is that a modest health plan can still avoid the tax penalties and here are the criteria to
meet this hurdle, according to Alan Tawshunsky, Tax Counsel for the Department of the Treasury.3
Coverage Test-The health plan must be offered to the fulltime employees, as defined in the previous
eligible employee section or the employer will have to pay a tax penalty. The level “B” penalty would
only apply to employees who opted to purchase insurance through a federal or state insurance
exchange (only for those firms with fifty or more eligible employees).
Benefit Level Test- To avoid the “A” penalty of $2,000 per employee, the health plan must meet the
minimum benefit threshold of 60% based on an actuarial formula. The acceptable health plan benefit
threshold can be determined two ways, by going to the government Health & Human Services web site
and use their calculator4
or by using one of the percentage of income methods previously described.
Health plan coverage must be offered to at least 33% of the workforce and at least 25% must enroll to
avoid a 2015 penalty. Note that the employer penalty for a noncompliant or nonexistent medical plan is
waived for employers with less than 100 includable employees for 2015.
Here is the link to the Centers for Medicare and Medicaid Minimum Health Plan Value Calculator, which
provides a downloadable EXCEL file for which you can enter your firm’s data:
http://www.cms.gov/site-search/search-
results.html?q=health%20plan%20minimum%20value%20calcuator
Once you have determined if your plan meets an acceptable level of employer responsibility you only
need to pay a tax penalty for the employees who opt out of the employer plan for the insurance
exchange model. Typically these employees will make this selection because they are eligible for the
federal tax credits, which apply to all (green card or citizen requirements apply) individuals within 400%
of the federal poverty rate. The penalty due would be based on the B penalty schedule as opposed to
the A penalty.
Determining Your Tax Penalty
Now that you understand the requirements for medical insurance or health plans, it is possible that your
firm may not meet the standards and have to pay a tax penalty. In fact, some of you may wish to avoid a
group insurance plan altogether and simply pay the penalty. Of course there are many considerations in
this complex decision making process including; the availability of health care plans through state and
federal insurance exchanges, the ability of people, regardless of their health to obtain medical insurance
under the Affordable Care Act, and the high cost of health insurance plans. There are also many
methods to reward and recognize employees such as a fixed benefit allowance per year, which could be
used to purchase individual insurance, a pay raise in lieu of insurance, and voluntary programs. To assist
you in this process, here is a quick summary:
If you plan does not meet the participation or benefit specifications of the ACA you will have to pay a
$2,000 penalty per includable employee.
3
Alan Tawshunsky, Tax Counsel, U.S. Department of the Treasury; Affordable Care Act: Employer Shared
Responsibility, Compliance Assistance Seminar, U.S. Department of Labor Health Benefits Education Campaign in
coordination with the Washington Office of the Insurance Commissioner, Bothell Washington, August 20, 2014
4
Centers for Medicare and Medicaid, Fact Sheet, May 16, 2014, and found online at:
http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Final-Master-FAQs-5-16-14.pdf

9. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 8
If your plan meets the benefit specifications and the participation requirements, you may only have to
pay a penalty for those employees who opt out of the employer plan and chose an insurance exchange
plan. This penalty is $3,000 for every employee who opts to obtain coverage through a state or federal
insurance exchange and is called the B penalty.
If your firm decides not to offer a medical plan you will have to pay a tax of $2,000 per includable
employee. This is called the A penalty.

10. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 9
Steps to Calculate Your Firm’s Potential Penalty
Scenario 1- Firm Has Medical Insurance Which Does Not Meet Criteria
Firm has at least 50 includable employees (the tax penalty only applies to firms with 100 employees for
2015)
You have determined that your medical insurance plan does not meet the government minimum benefit
mandate
Or you have determined that your employee participation does not meet the government mandate
You have made a decision that you are unable to alter these criteria to meet the standards
The tax penalty the employer must pay is $2,000 per includable employee
Includable employees are the fulltime and fulltime equivalents as determined earlier
Take that number, subtract 30 from it, and that sum is the base multiplier for the total penalty
Example: 55 employees -30 =25 includable employees
Tax penalty is 25* $2,000 or $50,000
This penalty would be assessed after the business tax filing for the 2015 fiscal year
This penalty only applies to firms with 100 or more employees for the 2015 year phase-in., so if your
fulltime and fulltime equivalent employees are less than that, there is no penalty.
The Public Health Services Act penalties will be assessed in 2016, so it benefits employers to make
medical plan decisions in 2015
Firm has medical
plan
•Your firm has 50 or
more fulltime or
fulltime equivalent
employees (100 in
2015)
Plan does not meet
benefit or
participation
standards
•Your firm has health
insurance plan, but
either benefit design or
the mnimum level of
Employeeparticipation
do not comply
Penalty is Fulltime
employees=55
55-30=25
25* $2,000=$50,000
•Here is how you
calculate your
penalty

11. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 10
Scenario 2-Firm Does Not Offer Medical Insurance
Firm has at least 50 fulltime or fulltime equivalent employees (penalty only applies to those with 100 or
more in 2015)
Firm has decided not to offer a medical insurance plan or a self-funded plan
Determine the fulltime and fulltime equivalent employees
Subtract 30 from that total and this is the multiplier for the penalty tax
Multiply $2,000 by that number
Example-100 FT EE-30 = 70
70 * $2,000 = $140,000
Compare that to the cost of purchasing medical insurance for at least 100 employees
That cost averages $4,885 per year according to the Kaiser Family Foundation
Net cost to the firm is still less than providing medical insurance for workers >$400,000
Employees can go to federal or state insurance exchanges and obtain medical insurance, with
government subsidies to help pay the premiums, regardless of their health
Employer does not have to be in the insurance business
Penalty is assessed after the filing of the 2016 tax year for firms with 50-99, but does apply to firms with
100 employees in 2015
Firm has no medical
plan
•No medical
insurance
Determine
includable EE's
•Fulltime and
FT equivalent
Employees
Total FT EE's is 30
30* $2,000= $60,000
•Calculate
Penalty

12. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 11
Scenario 3-Firm Has Medical Plan Which Meets All Mandates but Some Employees Enroll In
Insurance Exchange Anyway
Firm has at least 50 includable fulltime and fulltime equivalent employees (penalty only applies to those
with 100 for 2015 phase-in year)
Determine the number of employees who enrolled in state or federal insurance exchanges
Employees disclose this information on the required federal insurance marketplace disclosure form
which any firm with a medical plan must provide
Take the number of employees who enrolled and received federal tax credits in insurance exchanges
and multiply it by $3,000
This is your penalty, however there is a second penalty calculation and here it is
Take all fulltime and fulltime equivalent employees, minus 30, and multiply that times $2,000; if this
number is lesser than step 5, use this number
Though the penalty will only be assessed for firms with 100 or more fulltime employees in 2015,
employers with 50 or more employees will still have to assess their medical plan compliance for 2016.
Firm has medical
plan
•Have Medical Plan
and at least 50
includable
employees
EE's enroll in
insurance
exchange
•Medical plan
complies but some
employees opted to
enroll in the state or
federal insurance
exchange
Penalty =$3,000 *
Insurance
Exchange
Enrollers
•Penalty applies only
to those who enroll
in the exchanges and
receive federal tax
credit subsidies

13. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 12
Transition Relief for Employers in 2015
During 2015, the employer group can use any six months in a plan year to determine eligibility and it
does not have to be six consecutive months. This means the employer could “game the system” if it
wanted to put in the effort. Also, medical coverage must be offered to 33% of the workforce and 25%
must actually be covered on the plan. In other words, an employer can’t have a sham group health plan.
This harkens back to the pre ERISA days when employers set up fabulous pensions for themselves, to the
exclusion of their employees, resulting in the “top heavy” rules to prevent discrimination and tax ruses.
ERISA is the Employee Retirement Income Security Act of 1976, which was landmark legislation for
employee benefit plans and included the provision for self-insured medical plan exemptions, as well as
the pension rules.
Final Remarks
In conclusion, the government has determined and the courts have upheld the provision of medical
insurance as a Patient Protection and Affordable Care Act requirement. Additionally, the Supreme Court
upheld the right of the government to assess fines through the Public Health Services Act, for employers
who do not comply with the law. If you are an employer with fifty or more fulltime or fulltime-
equivalent employees, you must provide medical insurance or a medical plan and contribute an
acceptable amount toward the cost of the program, or pay a tax penalty. However, since the cost of a
group medical plan is now $4,885 per year just for the employee, many employers may elect to pay the
$2,000 or $3,000 per employee penalty and avoid the employer health plan morass. According to the
Kaiser Family Foundation’s 2013 Survey of Employer-Sponsored Health Benefits, family health plan
premiums now run $11,786.5
This means the employer may also opt to pay a penalty on some classes of
employees who fall under the annual shared responsibility rules, but continue to operate a health
benefit plan. It is doubtful that many employers with fifty or more employees would cancel a medical
benefits program, as this would have a negative impact on recruitment and retention of employees.
However, smaller employers may choose to reduce the size of their firm in order to avoid the penalties.
For brevity purposes this article has not listed any of the exemption criteria for the Accountable Care Act
or Public Health Services Act provisions, though employers may elect not to provide birth control
coverage for employees, they are not exempt from the insurance mandate. For more information on the
exemption criteria go to this previously published article, Religiously Exempt Health Care
Reimbursement Plans-A Closer Look, which was published in Straight Talk on Healthcare, on August 13,
2014 and is found online at:
http://healthpolicymaven.blogspot.com/2014/08/v-behaviorurldefaultvmlo.html
This document was written by Roberta E. Winter, who is a health policy analyst, consultant, and author
of Unraveling U.S. Healthcare-A Personal Guide, published by Rowman and Littlefield in 2013 and found
online at: http://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972#.
This document does not offer tax, legal, or insurance advice. It is meant as a simplified guide to
important provisions of the Affordable Care Act and the Public Health Services Act.
This document is protected by copyright laws of the United States and any reprints are subject to the
author’s permission. For questions on the document please contact Ms. Winter at
healthpolicymaven@gmail.com.
5
Kaiser Family Foundation 2013 Survey of Employer Sponsored Health Benefits and found online at:
http://kff.org/report-section/2013-summary-of-findings/

14. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 13
Bibliography
Alan Tawshunsky, J.D. 2014. "Tax Counsel, U.S. Department of the Treasury." Affordable Care Act:
Emoloyer Shared Responsibility, Compliance Assistance Seminar, U.S. Department of Labor,
Health Benefits Education Campaign. Bothell, Washington.
Health & Human Services Agency, U.S. A. 2015. U.S. Federal Poverty Guidelines Health & Human
Services. January 1. Accessed March 2015, 30.
http://aspe.hhs.gov/poverty/15poverty.cfm#thresholds.
Henry J. Kaiser Family Foundation. 2014. 2013 Survey of Employer Sponsored Health Benefits. Menlo
Park, CA: Kaiser Family Foundation. Accessed November 2014. http://kff.org/report-
section/2013-summary-of-findings/.
Internal Revenue Service Notice 2011-1. n.d. http://www.irs.gov/pub/irs-drop/n-11-01.pdf.
Service, Internal Revenue. November. Internal Revenue Service Public Notice. 1. Accessed October 2014,
2014. http://www.irs.gov/pub/irs-drop/n-11-0.pdf.
U.S. Centers for Medicare and Medicaid. 2014. Centers for Medicare and Medicaid Fact Sheet, CCHIIO.
May 16. http://www.cms.gov/CCIIO?Resources/Fact-Sheets-and-FAQs/Downloads/Final-
Master-FAQs-5-16-14.pdf.

15. ACAEmployerCompliance.sharedoc Roberta E. Winter, MHA, MPA 14