Summary of Potential Employer Penalties Under PPACA (P.L. 111-148)

Hinda Chaikind
Specialist in Health Care Financing

Chris L. Peterson
Specialist in Health Care Financing

This report provides a description and illustrations of the penalties, when applicable beginning in 2014, to employers under the new health insurance reform law—specifically, in §1513 and §10106 of the Patient Protection and Affordable Care Act (PPACA, P.L. 111- 148), as amended by §1003 of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). Hereafter, PPACA will refer to PPACA as amended by the reconciliation act. 

PPACA does not explicitly mandate an employer to offer employees acceptable health insurance. However, certain employers with at least 50 full-time equivalents will face penalties, beginning in 2014, if one or more of their full-time employees obtains a premium credit through an exchange.1 As described in greater detail below, an individual may be eligible for a premium credit either because the employer does not offer coverage or the employer offers coverage that is not "affordable." 

Application Only to "Large Employers" 

To be subject to these penalties regarding employer-sponsored health insurance, an employer must be a "large employer," defined as having "at least 50 full-time employees during the preceding calendar year."2 "Full-time employees" are defined as those working 30 or more hours per week.3 The number of full-time employees excludes those full-time seasonal employees who work for less than 120 days during the year.4 

The hours worked by part-time employees (i.e., those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis. This is done by taking their total number of monthly hours worked divided by 120. 

For example, a firm has 35 full-time employees (30+ hours). In addition, the firm has 20 parttime employees who all work 24 hours per week (96 hours per month). These part-time employees' hours would be treated as equivalent to 16 full-time employees, based on the following calculation: 

20 employees x 96 hours / 120 = 1920 / 120 = 16 

Thus, in this example, the firm would be considered a "large employer," based on a total full-time equivalent count of 51—that is, 35 full-time employees plus 16 full-time equivalents based on part-time hours. However, in terms of calculating potential penalties below, part-time hours and part-time employees are not included; only the actual 35 full-time employees would be counted.


Date of Report: April 5, 2010
Number of Pages: 5
Order Number: R41159
Price: $29.95

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