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The 95% Rule: Offering Coverage to “Substantially All” Full-Time Employees

95% Rule

Revised January 2024

Many schools, cities, and counties have employees working 30 hours or more per week as defined by the Affordable Care Act (ACA). Often these workers are not offered Health Insurance coverage. Sometimes the employer offers coverage but does not contribute toward the premiums.

Back in 2014, the ACA mandated that large employers (50+ full-time equivalent employees) offer affordable, minimum value health coverage to “substantially all” full-time employees or risk paying a penalty. “Substantially all” means at least 95% of full-time employees.

Failing to identify full-time employees and offering coverage, or contributing less than the ACA affordability standards may subject your organization to some steep penalties. Additionally, while you can intentionally or unintentionally exclude up to 5% based on the 95% rule, your actions cannot be done in a discriminatory fashion. 


Major League Penalty

You may be subject to a $2,970 annual penalty for every full-time employee (minus the first 30 employees) if

  • you do not meet the 95% threshold, or
  • fail to offer coverage of “minimum value”, and
  • one or more employees qualify for a premium tax credit or cost-sharing assistance, and
  • one or more employees purchase coverage from the public insurance exchange.


Minor League Penalty

You may be subject to a $4,460 annual per employee penalty if:

  • you offer coverage that is of minimum value but not affordable to 30-hour employees, and
  • any of the employees whom you do not offer affordable coverage qualifies for a premium tax credit or cost-sharing assistance, and
  • purchases coverage from the public insurance exchange.

Please note that the $4,460 penalty may apply to only the employees who were not offered affordable coverage who qualify for tax-credit or cost-sharing assistance and purchase coverage on the public exchange.

The intention of the 95% rule is likely a safeguard in cases of miscalculation by an employer who is otherwise in compliance. Caution is advisable on reducing costs by using the 95% rule to expressly exclude coverage for otherwise-eligible full-time employees. Even a slight miscalculation could trigger a very large penalty.

What should you do?

  1. Take the necessary steps to identify all employees working 30-hours or more based on ACA measuring standards.
  2. Calculate what penalties, if any, you may be subject too. Also determine what the penalty would be if no insurance was offered at all.
  3. Together with your medical insurance broker/consultant, develop a strategy that will mitigate any expected cost increases.

It is recommended that you complete this analysis annually and make the necessary changes to your employment practices. 



Employer Shared Responsibility Provisions (IRS)


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National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Erin Woulfe

Erin Woulfe

Erin Woulfe likes to write about things that matter. Keeping her finger on the pulse of what’s happening in the public sector world, she blogs about the latest legislative news and employee benefit trends that affect our school, city and county clients. She’s been with NIS since 2002. “I love connecting to our clients and providing them with the tools they need in order to administrate their plan,” says Erin. “Whether that be materials to educate their employees on certain benefits, how to effectively communicate change within an organization, or providing tips and how-to’s to help them make their job easier.”