The Patient Protection and Affordable Care Act (PPACA) does not explicitly require employers to offer their employees health insurance coverage. However, applicable large employers (generally, employers with at least 50 full-time employees) will face penalties beginning in 2014 if one or more of their full-time employees obtains a premium credit for coverage through a health insurance exchange. This provision is often referred to as the "play or pay" mandate.
PPACA does not carve out any exception to this "play or pay" mandate for employers that are state or local governments. Accordingly, if your state agency meets the definition of "applicable large employer," it will be subject to the mandate.
While the "play or pay" mandate as applied to state and local government employers remains susceptible to challenge on constitutional grounds, unless it is invalidated by the courts or otherwise amended, your state agency will be subject to it in the same manner as private employers beginning in 2014.
Source: Employee Benefits Management Directions, Issue No. 530, January 29, 2013.