Small Business Compliance With the Affordable Care Act

The Patient Protection and Affordable Care Act, sometimes called “Obamacare,” was enacted in 2010 to require employers with more than 50 full-time employees (Applicable Large Employers or ALEs) to provide health insurance for their employees. The ACA also eliminated restrictions on pre-existing conditions that had prevented some individuals from obtaining health benefits.

Small business owners may find ACA compliance complicated on paper. The requirements for small business health insurance depend on the number of employees and whether an employer offers group health care plans.

The ACA also covers individual coverage through private insurance plans. The outcome of the ACA was affordable coverage for more Americans.

ACA Business Requirements

The ACA requires health insurance plans for businesses with 50 or more full-time or full-time equivalent employees who work 30 or more hours per week. These ALEs are required to:

• Provide affordable health insurance according to ACA regulations. “Affordable” means it costs less than a specific percentage of an employee’s take-home income. In 2025, employees must pay no more than 9.02% of household income.
• Offer a minimum acceptable health plan that meets ACA requirements to at least 95% of full-time employees. The plan must pay at least 60% of covered medical expenses.
• Employers must file regular reports of the healthcare coverage provided. This includes updates for any changes in policy.

Businesses with fewer than 50 employees are not required to provide full-time workers with health insurance.

Small Business ACA Requirements

Small business owners must give employees a Notice of Marketplace Coverage Options. If there are other ACA regulations that apply to their business, owners must follow these regulations.

Small business owners who choose to provide their employees with health care coverage have some options under the ACA. The Small Business Health Options Program (SHOP) gives small business owners access to health insurance marketplaces. It offers tax credits for companies with fewer than 50 employees who want to offer their employees health insurance coverage.

Small Business ACA Compliance

Businesses that already offer health insurance don’t need to change their insurance plans if they conform to ACA minimum essential coverage requirements. Examples of minimum essential coverage plans include:

• Most major insurance plans
• Medicare, Medicaid, and Tricare
• Employer-sponsored health insurance

Minimum essential coverage permits special enrollment periods for employees with a qualifying life event. Minimum coverage is not the same as minimum value. Minimum value plans must provide adequate coverage. A bronze-level plan is often considered to be a minimum value insurance plan.

If small business owners decide to offer employee health insurance, they must follow all ACA regulations, such as offering coverage to at least 95% of eligible workers. The small business section of HealthCare.gov provides additional information about small business compliance with the ACA.

Small business owners must provide employees with a summary of benefits and coverage. The summary should explain the plan’s cost and coverage. Employees have the option to compare the affordability and benefits of the employer’s plan. They may also select another insurance plan.

Qualifying for Tax Credits

The ACA offers generous Small Business Health Care Tax Credits to small businesses with fewer than 25 full-time workers. The SHOP program offers tax credits up to 50% of an employer’s contribution to full-time employees’ (FTEs‘) health insurance premiums.

Eligibility requirements include:

• Paying at least half of the employees’ health insurance premium costs
• Average annual wages below $66,600 (in 2025)

Go to the healthcare tax credit calculator to learn more about tax credits or to estimate the tax credit you may receive.

Self-Insured Employers and Self-Employed

Self-insured businesses must report their employer-sponsored coverage to the IRS on their annual tax returns. For ACA purposes, employer-sponsored coverage can include:

• Group health plans, such as a state marketplace plan or a government health benefit program
• COBRA coverage
• Self-insured in-house coverage
• Retiree health insurance

Self-employed individuals do not need to report any insurance through the ACA or the Department of Labor (DoL). Instead, if they purchased insurance through a state marketplace, they receive a form showing they had minimum essential coverage, and file that with their income taxes.

Penalties and Other Provisions

The Employer Shared Responsibility Provision is a penalty the IRS levies against employers who must provide health insurance but fail to do so. In general, only ALEs are subject to this provision. It applies if they fail to offer health insurance to at least 95% of full-time employees, their coverage is not affordable, or at least one full-time employee received a premium tax credit for purchasing coverage through the Health Insurance Marketplace. IRS penalties are both steep and confusing, so employers should confirm their tax status with their accountant.

Additional provisions of the ACA include:

• The waiting period for employer-sponsored health coverage can be no more than 90 days from hiring to coverage. New hires must have health insurance by the 91st day, regardless of their probationary or preliminary status.
• Workplace Wellness Programs may offer price breaks or tax incentives for company-wide programs (up to 50% for some smoking cessation programs). Businesses should contact their state Department of Health and Human Services for more information.
• Employers must provide current and newly hired employees with a Notice of Marketplace Coverage Options. This is mandatory.

Get Legal Advice About ACA Compliance

ACA compliance and tax laws are complex at the best of times. Insurance companies make it even more difficult when discussing employer mandates and tax credits. Businesses that must stay compliant with healthcare law should consider speaking with a business attorney for help and legal guidance.