Organizations across industries are looking at adjustments that may affect their employee benefits in the coming year.
One of those upcoming adjustments for 2025 is the out-of-pocket maximums and projected employer mandate penalties under the Affordable Care Act (ACA).
A Quick Review of the ACA
The Affordable Care Act (also referred to as Obamacare) is a healthcare reform law enacted in 2010 that makes health insurance coverage affordable and available to more people, expands Medicaid, and seeks to lower the cost of healthcare by supporting innovative medical care delivery methods.
The ACA mandates certain employer-sponsored coverage 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:
- Employer shared responsibility provisions. This provision means you must 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.
- Employer information reporting for offers of minimum essential coverage. This 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.
Note: Non-ALEs that sponsor self-insured group medical plans must also report offers of minimum essential employee coverage.
ACA Out-of-Pocket Maximums for 2025
In 2025, the ACA out-of-pocket maximum for employers with sponsored group health plans can impose on enrolled employees will be $9,200 for individual coverage (down from $9,450 last year) and $18,400 for family coverage (down from $18,900 last year). The 2025 out-of-pocket maximum (OOPM) reflects a 2.6% decrease compared to the 2024 limits.
This annual OOPM limit applies to most non-grandfathered group health plans, whether they’re fully insured or self-funded (administrative services only). However, it doesn’t apply to grandfathered plans, Transitional Relief plans, or retiree-only plans.
The OOPM includes costs like copayments, deductibles, and coinsurance for medical and pharmacy benefits.
It’s worth noting that high-deductible health plans (HDHPs) paired with health savings accounts (HSAs) follow different limits for OOPM, deductibles, and contributions.
The Different Types of ACA Penalties
Under the Affordable Care Act (ACA), there are different types of penalties that can be imposed on employers who fail to meet certain requirements regarding health insurance coverage for their employees. These penalties, often referred to as the “A” and “B” penalties, are designed to ensure that employees have access to affordable and adequate health coverage.
Understanding these penalties is important for employers to avoid potential financial liabilities and comply with the ACA provisions. In the following sections, we will dive into the details of each type of penalty and how they are calculated.
Understanding 4980H 2025 ACA Penalties
In 2025, under section 4980H of the Affordable Care Act (ACA), employers are subject to penalties for not offering affordable and comprehensive health insurance coverage to their full-time employees. There are two penalty provisions under this section: 4980H(a) and 4980H(b).
The 4980H(a) penalty is applicable to large employers with 50 or more full-time employees (including full-time equivalent employees) who do not offer minimum essential coverage to at least 95% of their full-time employees and dependents. If an employer fails to meet this requirement, they may be subject to an annual penalty.
Understanding these penalties is crucial for employers to ensure compliance with the ACA and to avoid substantial financial consequences.
What is the 2025 ACA Penalty 4980H(a) Amount?
The 2025 ACA penalty for 4980H(a) amount is $2,900. The 2025 ACA penalty for 4980H(a) is an important consideration for businesses that do not offer health insurance coverage to their full-time employees. This penalty is also known as the “hammer penalty” and is calculated based on the number of full-time employees a company has.
Example: In 2025, John’s Pizza Parlor has 75 full-time employees and doesn’t offer Minimum Essential Coverage (MEC) to its employees. The penalty is triggered when at least one full-time employee obtains a Premium Tax Credit through the marketplace.
For each full-time employee, John’s Pizza Parlor would be subject to a penalty of $2,900.
In the case of John’s Pizza Parlor, if 10 full-time employees obtain Premium Tax Credits, the penalty amount for the business would be roughly $29,000.
Note: It’s critical to consult with a professional to ensure the calculations for your unique situation are correct.
It’s important for businesses to be aware of the 2025 ACA penalty 4980H(a) amount and the potential impact on their organization. By offering health insurance coverage to their full-time employees, businesses can avoid these penalties while ensuring their employees have essential coverage.
What is the 2025 ACA Penalty 4980H(b) Amount?
The 2025 ACA penalty 4980H(b) is $4,350. The 2025 ACA penalty 4980H(b) amount is assessed on a per-violation basis when an employer offers unaffordable or non-Minimum Value coverage to their employees, and an employee receives a Premium Tax Credit (PTC) from a state or federal health exchange.
For each employee who receives a PTC, the penalty is roughly $363 per month or $4,350annualized. This penalty is designed to incentivize employers to offer affordable and comprehensive health insurance coverage to their employees.
Example: ABC Company will have 100 full-time employees in 2025. Out of these employees, 20 obtain PTCs from a health exchange because the coverage offered by ABC Company is either unaffordable or does not meet the Minimum Value requirements.
In this case, ABC Company would be subject to a penalty of $4,350 per employee who receives a PTC. Therefore, the total penalty for ABC Company would be $87,000 ($4,350 multiplied by 20 employees).
It’s important for employers to ensure that their health insurance coverage meets the affordability and Minimum Value standards set by the ACA to avoid being subject to these penalties. Employers can consult with healthcare experts or insurance providers to navigate the complex regulations and ensure compliance with the ACA requirements.
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.
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