Eligibility and effective dates
Coverage eligibility under the Affordable Care Act
The Affordable Care Act introduced rules that could affect your employees’ eligibility for health care and when you need to offer it
Applicable large employers (ALE)
The ACA mandates that applicable large employers offer health insurance for full-time employees and their dependent children up to age 26. An applicable large employer is a business that employed at least 50 full-time or full-time equivalent employees on business days during the preceding calendar year.
Employee coverage effective dates
Individuals must have health care coverage that meets the ACA’s minimum value and affordability requirements for each month of the year, or the employer will face a tax penalty.
Health care coverage for employees of applicable large employers must meet these requirements:
- Affordability: Based on the ACA’s affordability standard as adjusted for inflation, health coverage will satisfy the requirement to be affordable if the lowest-cost self-only coverage option available to employees does not exceed 9.86 percent of an employee’s household income (use the employee’s pay rate to determine this percentage).
- Coverage percentage: 95 percent of full-time or full-time equivalent employees must be provided health insurance to avoid a tax penalty.
- Minimum value: The percentage of costs the health plan must cover is 60 percent.
How the ACA defines employee status
It’s important to understand how the ACA defines employee status to ensure your business complies with the law:
Determining group size
Michigan law stipulates that the counting method had changed to include both “full-time employees” and “full-time equivalents” (FTEs). Group size is determined each calendar year and generally depends on the average size of an employer’s workforce during the prior calendar year.
A group with 50 or less total full-time employees, made up of both full-time employees and FTEs. Groups must consider all related entities, company divisions and locations to determine group size.
A group with 51 or more total full-time employees, made up of full-time employees and FTEs.
- Full-time employee: An employee receiving a W-2 form and employed on average at least 30 hours per week – or at least 130 hours per month.
- FTEs: A calculated combination of all part-time employees, determined by an equation, as outlined below.
How to calculate the number of FTEs
Add the number of hours of all part-time employees for the month but do not include more than 120 hours per employee. Divide the total number of those hours by 120. This is your number of FTEs.
How to calculate the total number of full-time employees and FTEs
Add the number of FTEs to the total number of existing full-time employees. Generally, employers need to perform this calculation for each month of the prior calendar year. This is the sum of the number of full time employees and FTEs. Divide this number by 12 to obtain the full-time employee and FTE count.