Maryland Life and Health Insurance License Practice Exam

Under the Affordable Care Act, how is the penalty for large employers calculated if they do not provide health insurance?

1. Based on the number of full-time employees minus 50

2. Based on the number of full-time employees minus 30

3. Fixed at $1,000 per employee

4. Percentage of total payroll

The correct answer is: Based on the number of full-time employees minus 30

The penalty for large employers who do not provide health insurance under the Affordable Care Act (ACA) is calculated based on the number of full-time employees minus 30. This approach is designed to account for smaller businesses that may not be able to afford to provide insurance. Specifically, if a large employer (defined as having 50 or more full-time equivalent employees) fails to offer affordable health insurance to at least 95% of its full-time employees and their dependents, the employer can incur a penalty. The penalty is assessed for each full-time employee over 30, which helps to minimize the financial burden on employers that are close to the threshold of having to provide insurance but are still struggling to do so. By calculating the penalty in this manner, the ACA encourages employers to provide health coverage while also making allowances for those with slightly larger workforces. This is crucial in ensuring that businesses are incentivized to offer health benefits, which in turn can lead to better health outcomes for employees. Other options, such as a fixed penalty per employee or a percentage of total payroll, do not align with the legislative intent or guidelines outlined within the ACA regarding large employer penalties. Thus, the calculation method of subtracting 30 from the number of full-time