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“It’s a Barbarity that Clarity is a Rarity”


So cheesy, but so true is the wisdom of Professor Bunsen Jude the Science Dude.

Anyone who has ever read (or attempted to read) an Insurance Contract knows that even a plain-language contract is a far cry from clearly understandable.

Now, let’s add a huge pile of both Regulations, Rulings, and Opinions creating over 20,000+ pages all surrounding Healthcare Reform, and Clarity goes beyond Rarity.  It becomes statistically improbable to understand.

Is your Offer “Affordable”?


As an Employer, understanding what creates an “affordable” offer is important.

Actually, it’s paramount to make sure your offer meets this criteria.  Failing to do so could cause you to pay a “fine” in addition to the cost of insurance you provide.  A Double-Whammy is bad.



Affordability only matters if …..


Before we can talk about affordability, we need to revisit the two potential Employer Penalties inside the “Pay or Play” provision.

The good news here, is that as an employer, you can’t be penalized under both sets of rules.

The bad News here is that it is not hard to be subject to one of them.


Penalty “A” — the Section 4980H(a) fine:

If a “Large” Employer (ALE), doesn’t offer coverage to 95% of it’s eligible employees & at least one single employee receives a subsidy for coverage through either the Federal Exchange ( or a State-Based Exchange, the fine is applied.

The 2017 fine is indexed to be $2,260 per Full Time Employee.  The Employer gets an Exemption of 30 “Freebies.”

Example:    Tom’s King of Wings is a quick-serve restaurant that does not offer coverage.

Tom's King of WingsTom’s King of Wings has 15 store locations averaging 11 true Full-Time Employees per store.    11 x 15 = 165 Full Time Employees

165 Full Time Employees – Minus 30 “Freebies”  =  135 Employees x $2,260 = $305,100  Penalty “A” fine could be assessed.


Penalty “B”  — the Section 4980H(b) fine:

If a “Large” Employer (ALE) does offer coverage that meets the Minimum Essential Coverage (MEC), but that coverage fails either the “Minimum Value” test or the “Affordability” test, a “B” penalty could apply.

Unlike the “A” penalty, the “B” penalty would only apply to any single employee who received a government subsidy (not to the entire Full-Time workforce).

The 2017 fine for the 4980H(b) penalty is indexed to be $3,390 per Full Time Employee who receives a subsidy.

Example:  Jerry’s Eurosport is a automotive dealer with 3 locations and 130 true Full-Time Employees.

Jerry's EurosportJerry’s offers a health plan to all of it’s Full-Time employees & the plan meets both Minimum Essential & Minimum Value Standards.

Jerry’s lowest cost Minimum Value Health plan costs the employees $86 per Bi-Weekly Pay-Period.

Jerry’s has 100 Employees who make over $40,000; 10 employees between $30,000 and $40,000; and 20 employees who make below $30,000.

Does Jerry’s Plan meet Affordability?

See tomorrow’s post for tthe Breakdown of Affordability Safe Harbors to find out.



Bret Brummitt

Bret Brummitt

Senior Consultant

About the author: An avid learner and resourceful leader with a passion for problem solving, Bret is a calming force in the chaos and fast paced evolution of health insurance, employee benefits, and the growing burden of regulatory compliance. He helps people develop the confidence to see beyond the problem at hand and start to re-imagine their goals. Whether he’s helping a client or a colleague, Bret believes a successful interaction is one that allows us all to dream a little bigger when we’re done.

About AG Insurance: AG Insurance ( helps employers and their employees with solutions focused on positive organizational impact and improved employee experiences.