The Affordable Care Act (ACA) and Small Business
Under the Affordable Care Act (ACA), small businesses with fewer than 50 full-time equivalent employees will NOT be required to provide health insurance to their employees. Regardless of whether or not they provide coverage, many small businesses are required to notify their employees about the new State Exchanges where individuals can purchase health insurance.
In addition, employers with fewer than 50 full-time employees have the option of purchasing private insurance through the new Small Business Health Options Program (SHOP) Marketplace in their state. Beginning in 2016, the SHOP will also be open to employers with 50-100 full-time employees. Employers can set up a SHOP health coverage plan for their employees any time of the year. Small businesses can also continue their current coverage or seek other options in the traditional health insurance market. Tax incentives are available for some small businesses (with under 25 employees) that offer health insurance to their employees. For more information on the SHOP and the Small Business Health Care Tax Credit, click on the links to the pages below.
The ACA and Medium and Large Business
Starting in 2015, businesses with 100 or more employees will be required to provide their full-time workers (30 plus hours weekly) with affordable health insurance. In 2016, businesses with 50-99 employees will face this mandate. Paying for all or a portion of health insurance for employees' families will be optional. As of 2015, medium and large employers can continue their current coverage or seek other options in the traditional health insurance market. Companies with 50 or more workers that do not comply with the law will be subject to an Employer Shared Responsibility Payment. While employer contributions to employee premiums are tax deductible, the Employer Shared Responsibility Payment is not tax deductible.
The amount of the annual Employer Shared Responsibility Payment will be based on whether the company offers affordable health care insurance or health insurance provided at a minimum value.
- Businesses that do not offer health care insurance will be required to pay an annual tax penalty of $2,000 per full time employee - excluding the first 30 employees. For example, an employer with 100 uninsured employees would pay a penalty of $140,000 (70 x $2,000)
- Businesses that do offer insurance, but the insurance is not within the affordability requirements for a specific full time employee will be fined $3,000 for each employee who qualifies for a premium discount to purchase health coverage in the individual Exchange marketplace. Affordability is defined as an employee's share of the premium costs for employee-only (not dependents’) health coverage below 9.5% of their yearly household income. For example, an employer with 100 employees – 95 employer-insured employees and five employees that purchased health coverage in an Exchange (made affordable using a premium discount based on their income) - would pay a $15,000 penalty for those five employees.
Businesses with more than 50 full-time equivalent employees are not currently able to use the Small Business Health Options Program (SHOP) to purchase health insurance for their workers. However, starting in 2016, the SHOP marketplace will sell health insurance to employers with up to 100 full-time equivalent employees.