Obamacare: Small Business Compliance with the Affordable Care Act

Employers of all sizes must comply with the Patient Protection and Affordable Care Act (ACA), commonly referred to as "Obamacare." Small businesses may benefit from some of the ACA's incentives, such as access to the health insurance marketplaces and certain exemptions. Only large businesses, those with 50 or more full-time equivalent (FTE) employees -- working 30+ hours per week on average -- are required to offer health insurance or pay a penalty.

The law phases in over time, with the employer mandate affecting large businesses taking effect in 2015.

This article focuses on the basics of Obamacare for small businesses, how to comply with the law, and your health care options as a small employer. See Obamacare Basics: Understanding the Affordable Care Act for a general overview of the ACA.

If You Already Offer Health Insurance to Your Employees

As long as your health coverage is considered a Qualified Health Plan, meaning it conforms to the minimum standards governed by the ACA, you will not have to change plans. Your employees may purchase a private plan instead, but you aren't required to make a contribution to their premiums if they choose to do so.

Summary of Benefits and Coverage

All employers are required to provide their employees with a summary of benefits and coverage form, which explains the cost and coverage of their plan. The purpose of this notice is to allow employees to compare the employer-sponsored plan with those offered in the private market. Penalties may be levied for noncompliance.

Small Business Health Care Tax Credit

Businesses with fewer than 25 FTE employees may be eligible for the Small Business Health Care Tax Credit. This tax credit is worth up to 50 percent of your contribution to FTE employees' health insurance premiums. To qualify, you must pay at least half of your employees' total health insurance premium costs and pay average annual wages below $50,000. See What You Need to Know About the Small Business Health Care Tax Credit to learn more about the credit and download the appropriate IRS forms. Additionally, the IRS has an online health care tax credit calculator to help you estimate the amount.

Additional Provisions

  • Regardless of company size, employees who are eligible for employer-sponsored health coverage may not be made to wait more than 90 days before coverage kicks in (beginning Jan. 1, 2014).
  • Employers that implement health-contingent workplace wellness programs are eligible for a reward of up to 30 percent of the cost of health coverage (up to 50 percent for smoking cessation programs); see Workplace Wellness Programs for more general information.
  • Employers must provide current and newly hired employees with a Notice of Marketplace Coverage Options (this form is for employers currently offering coverage).

If You Do Not Offer Health Insurance to Your Employees

If you don't currently offer health insurance benefits, you will not be penalized as long as you have fewer than 50 FTE employees. You will need to provide your current and newly hired employees with a Notice of Marketplace Coverage Options (this form is for employers not offering coverage) and comply with the other provisions listed in the previous section.

Small Business Health Options Program

Small businesses with up to 50 FTE employees may access the health care insurance marketplaces through the Small Business Health Options Program (SHOP), for coverage beginning in 2014 (employers with up to 100 FTE employees will be eligible for coverage beginning in 2016). Call the Dept. of Health and Human Services (HHS) at 1-800-706- 7893 for information about the SHOP Marketplace.

Need Additional Help?

For more information about Obamacare and small business, see the small business section of HealthCare.gov, or speak with an employment or health care attorney who regularly works with small businesses.


Next Steps

Contact a qualified health care attorney to help navigate legal issues around your health care.

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