Now that the year is more than halfway over, organizations across industries are starting to look at adjustments that may affect their employee benefits in the coming year. One of those upcoming adjustments for 2023 is the out-of-pocket maximums and projected employer mandate penalties under the Affordable Care Act (ACA)

As you gear up for 2023, here’s what you need to know.

Quick review of the ACA

The Affordable Care Act (also referred to as Obamacare) is a health care reform law enacted in 2010 that makes affordable health insurance available to more people, expands Medicaid, and seeks to lower the cost of health care by supporting innovative medical care delivery methods. The ACA mandates certain employer responsibilities and benefits that depend on the structure and size — i.e., the number of full-time employees and full-time equivalents — of the business. 

If you have 50 or more full-time employees or full-time equivalents, your business is considered an Applicable Large Employer (ALE). Two provisions of the ACA apply only to ALEs: 1) the employer shared responsibility provisions, and 2) employer information reporting for offers of minimum essential coverage. Note: non-ALEs that sponsor self-insured group medical plans are also required to report offers of minimum essential coverage. 

The first provision means you need to offer minimum essential health care coverage to your full-time employees and their dependents or make an employer shared responsibility payment to the Internal Revenue Service (IRS) — also referred to as the “employer mandate penalty” — if you fail to provide coverage. The second provision means you also have to send annual reports to the IRS about the health care coverage you offered if any — and send a statement to employees with the same information that you provided to the IRS. 

Brief intro of new guidance

The Department of Health and Human Services (HHS) recently announced new measures that will help consumers find more affordable health care coverage on as part of the Biden Administration’s effort to strengthen the ACA. The measures will apply to the upcoming open enrollment period which begins on November 1, 2022. 

As part of that announcement, the 2023 Notice of Benefits and Payment Parameters makes regulatory changes that apply to the individual and small group health insurance markets. The guidance also reveals the premium adjustment percentage for 2023 for employer-sponsored insurance (ESI), which is 1.44%.* This percentage is used to index next year’s maximum annual limitation on cost sharing and the required contribution percentage to determine eligibility for certain exemptions, as well as the employer shared responsibility payment amounts. (See the out-of-pocket maximums and employer mandate penalties below.)

*This percentage is rounded from the full 1.4408219719.

ACA out-of-pocket maximums for 2023

In 2023, the ACA out-of-pocket maximum for employers with sponsored group health plans can impose on enrolled employees will be $9,100 for individual coverage (up from $8,700 last year) and $18,200 for family coverage (up from $17,400 last year). These changes both represent a 4.6% increase from the previous year. 

Employer mandate penalties for 2023

Although the IRS has not yet confirmed the 2023 employer mandate penalties, the same 4.6% increase noted above is projected to apply to the penalties as well. If that’s the case, you can expect the employer mandate (a) penalty to increase to $2,880 (up from $2,750 last year) and the (b) penalty to increase to $4,320 (up from $4,120 last year). 

2023 Employee Benefits Adjustments

The IRS recently released the new required employer responsibility amount for 2023 to determine affordability will be9.12%, decreasing from 9.61% in 2022. This percentage is used to assess whether an employee is offered affordable minimum essential coverage, per subsection (b) of the employer mandate. For taxable years and plan years beginning after December 31, 2022, this revenue procedure will be in place.

How PrimePay can help with ACA compliance

The ACA is complex, and as you look ahead to 2023, you need to ensure you have the right tools in place to help you navigate the changes outlined above and stay compliant. PrimePay’s ACA compliance solutions help you fulfill your requirements with form and filing support, employee status tracking, warnings of potential penalties, and other services. 

Get the Right Guidance

It’s critical that you apply correct yearly adjustments for employee benefits and determine any other impact these adjustments may have on your business. Partnering with an HR solutions provider can help you get the guidance you need.

Learn more about how PrimePay can help you offer consumer-driven health plans to your employees. Click here to view our breadth of Benefit Services.


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