The Affordable Care Act requires applicable large employers to make broad-based offers of group health insurance coverage to substantially all their full-time employees or face potential tax penalties. (The term “applicable large employer” generally means and refers to an employer that employs at least 50 full-time and full-time equivalent employees on business days during the previous calendar year. A transition rule applies for 2015 that exempts employers with between 50 and 100 50 full-time and full-time equivalent employees, if certain requirements are satisfied.) Though technically referred as “employer shared responsibility rules,” these rules are also referred to colloquially as “play or-pay rules.” By whatever name, these rules represent a major shift from prior law and practice.

Employers that fail to offer minimum essential coverage (MEC) to at least 70% of their full-time employees (95% after 2015) and their dependents are subject to a tax penalty on all full-time employees (over the first 80). Plans can qualify as MEC by covering preventive and wellness services only (sometimes called “skinny” plans). Offering a skinny MEC plan will protect the employer from the tax penalty on all full-time employees, but the employer will still be subject to a tax penalty for any full-time employee who buys health insurance through a state exchange and receives a government subsidy. To avoid penalties on employees getting subsidies, an employer must offer a plan that is affordable (i.e., the employee’s share of the premium for single-only coverage does not exceed 9.5% of the employee’s wages) and provides “minimum value.” Guidance issued by the U.S. Internal Revenue Service last fall provides that, to be considered minimum value, health insurance plans commencing after the 2015 plan year must include inpatient hospital and physician services—i.e., they must be true major medical plans.