Small employers, typically defined as businesses with fewer than 50 full-time equivalent (FTE) employees, are generally not required to purchase health coverage for their employees. The employer mandate applies to larger employers, and these companies sometimes purchase “MEC plans,” sometimes referred to as “skinny plans” because they cover only the bare minimum services required under the ACA, to avoid the across-the-board penalty under section 4980H (a) of the tax code.
For small employers not subject to the employer mandate, purchasing an MEC plan may not be necessary or beneficial, as these plans provide limited benefits. However, if a small employer is under common ownership with other companies and the combined total of FTEs across all entities is 50 or more, they could be considered an ALE under the ACA. In such cases, the group of commonly owned businesses might consider and MEC plan to comply with the employer mandate. The relatively low premium of an MEC plan might be less than the penalty they would pay for not offering group health coverage.