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Eligibility and effective dates

Coverage eligibility under the Affordable Care Act

The Affordable Care Act has rules that could change how your client provides health insurance to their employees. Some of these rules also outline when employees are eligible for health insurance coverage.

Employee coverage effective dates

The ACA requires individuals to have health care coverage that meets the ACA’s minimum value and affordability requirements. This requirement must be met for each month of the year or the employer will face a tax penalty.

Health care coverage for employees of applicable large employers, known as ALEs, must meet these requirements:

  • Affordability: An employee’s cost of coverage must not exceed a maximum percentage of their total household income (employers can determine this percentage using the employee’s pay rate).
  • Coverage percentage: The employer must provide insurance to a specified percentage of full-time employees to avoid a tax penalty.
  • Minimum value: The health plan must cover a certain amount of the cost of health care.

Applicable Large Employers

The ACA requires applicable large employers to offer health insurance to full-time employees and their dependent children until age 26. An ALE is defined as an employer who had at least 50 full-time employees (including full-time equivalent employees) employed on business days during the preceding calendar year.

Is your client an ALE?

Which employees need to be covered?

If your client employs variable hour or seasonal employees, make sure they’re in compliance with the ACA’s rules on full-time equivalent employees.

Full-time employees

A full-time employee is reasonably expected to work at least 30 hours per week, according to the ACA (PDF). These employees must be offered health insurance by their employer.

Variable hour and seasonal employees

Businesses must offer health care coverage if their variable hour or seasonal employees average 30 hours per week or more.

  • Variable hour employees have current hours that are uncertain. Or you cannot otherwise determine whether they’re considered full time.
  • Seasonal employees have an annual employment of six months or less.

Employers can look back at an employee’s work hours over a period of 6 or 12 months and average the hours to evaluate coverage eligibility. This is known as the measurement period.

An employee’s eligibility or ineligibility for coverage based on average weekly work hours is locked in for the same length of time as the measurement period for the previous year. This is known as the stability period. Changes to the employee’s work hours over this period don’t change their current eligibility status. However, changes will affect eligibility during the next measurement period.

Businesses can determine the length of measurement periods. Employees may become eligible for insurance coverage at different points during the plan year.

Temporary employees

Temporary employees, or short-term employees, are expected to work less than one year when they’re hired. If they work more than 30 hours per week and aren’t a seasonal or variable hour employee, they’re eligible to receive health insurance coverage.

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