Affordable Care Act (ACA)

Navigating health insurance as a small business owner can be overwhelming, especially with all the talk about the Affordable Care Act (ACA). But don’t worry—I’m here to break it down in plain English. If you’re wondering how the ACA affects your small business, what’s required, and how to offer affordable health benefits, you’re in the right place. Let’s clear up the confusion and see how you can provide valuable coverage without breaking the bank.

What is the Affordable Care Act (ACA)?

The Affordable Care Act (ACA), sometimes called "Obamacare," is a federal law designed to make health insurance more accessible and affordable. It was signed into law in 2010 and aims to:

• Expand health insurance coverage to more Americans
• Provide consumer protections, like preventing insurers from denying coverage due to pre-existing conditions
• Offer subsidies to make health insurance more affordable for individuals and families

The ACA also sets rules for employers, including requirements for providing health insurance to employees. But what does that mean for small businesses?

Does the ACA Apply to Small Businesses?

Here’s the good news: Not all small businesses are required to provide health insurance. The ACA has specific rules depending on your company size:

Small Businesses with Fewer Than 50 Employees

If you have fewer than 50 full-time equivalent employees (FTEs), you are not required to provide health insurance. However, offering health benefits can help attract and retain top talent.

Small Businesses with 50 or More Employees

If your business has 50 or more FTEs, you are considered an Applicable Large Employer (ALE) under the ACA. ALEs are required to:

• Provide health insurance to at least 95% of full-time employees (and their dependents) that meets minimum essential coverage
• Ensure the insurance is affordable, meaning the employee’s share of the premium doesn’t exceed 9.5% of their household income
• Report coverage details to the IRS and employees using Forms 1094-C and 1095-C

Not complying with these requirements can result in hefty penalties, so it’s crucial to understand your obligations.

ACA Benefits for Small Businesses

Even if you’re not required to offer health insurance, the ACA provides several benefits that can make it easier and more affordable to do so:

Small Business Health Care Tax Credit

If you have fewer than 25 full-time employees and pay average wages of less than $56,000 per year, you might qualify for a Small Business Health Care Tax Credit. To be eligible, you must:

• Pay at least 50% of your employees’ health insurance premiums
• Offer coverage through the Small Business Health Options Program (SHOP) Marketplace

This tax credit can cover up to 50% of premium costs, making it easier for small businesses to afford health benefits.

SHOP Marketplace

The SHOP Marketplace is an ACA-created platform designed for small businesses to compare and purchase health insurance plans. It allows you to:

• Control costs by setting a budget for employee coverage
• Offer multiple plan options so employees can choose what suits them best
• Qualify for the Small Business Health Care Tax Credit

However, the SHOP Marketplace isn’t the only option. Flexible alternatives, like the Individual Coverage Health Reimbursement Arrangement (ICHRA), can provide even more control and cost savings.

How ICHRA Complements the ACA

If navigating traditional group health insurance feels overwhelming, an Individual Coverage Health Reimbursement Arrangement (ICHRA) could be the perfect solution. ICHRA allows you to:

• Set a fixed budget for health benefits, avoiding surprise premium increases
• Reimburse employees tax-free for individual health insurance premiums and eligible medical expenses
• Allow employees to choose the health insurance that fits their needs

Since ICHRA is fully compliant with ACA rules, it offers a flexible, cost-effective way for small businesses to provide health benefits without managing a complex group plan.

ACA Compliance and Reporting Requirements

To stay compliant with ACA requirements, certain reporting obligations apply:

Form 1095-C and 1094-C

• 1095-C: Provided to employees to detail the coverage offered
• 1094-C: Filed with the IRS to report employer-provided health coverage

These forms are mandatory for Applicable Large Employers (ALEs) but not required for businesses with fewer than 50 employees. If you’re offering ICHRA, SimplyHRA handles the paperwork to keep you compliant and stress-free.

Affordable Alternatives: Why Choose SimplyHRA?

Navigating the ACA doesn’t have to be complicated. At SimplyHRA, we make it easy for small businesses to offer flexible, affordable health benefits:

• Cost Control Without Surprises: Set your own budget, avoiding unexpected premium hikes.
• Employees Choose: Let your employees pick the health plan that suits them best.
• Hassle-Free Compliance: We take care of the paperwork, so you stay ACA-compliant without the headaches.
• Affordable and Simple: No need for expensive HR staff—our software does the heavy lifting.

With SimplyHRA, you can provide valuable health benefits while maintaining full control over your budget.

Why SimplyHRA is the Best Choice for Small Business Health Benefits

Offering health benefits under the ACA doesn’t have to be complicated or expensive. SimplyHRA provides a hassle-free, affordable solution tailored to small businesses. By choosing ICHRA, you maintain cost control, empower your employees to select their own health coverage, and stay compliant without dealing with complex paperwork.

Ready to simplify health benefits? Sign up for an employer account or Schedule a demo today!

Frequently Asked Questions (FAQs) about the Affordable Care Act (ACA):

Q: Are small businesses required to provide health insurance under the ACA?

A: No, small businesses with fewer than 50 full-time equivalent employees (FTEs) are not required to provide health insurance under the ACA. However, businesses with 50 or more FTEs must offer health coverage that meets minimum essential coverage standards or face potential penalties.

Q: Can small businesses get financial help for offering health insurance?

A: Yes, small businesses with fewer than 25 full-time employees and average wages below $56,000 per year may qualify for the Small Business Health Care Tax Credit. This credit can cover up to 50% of the employer’s premium costs if coverage is purchased through the Small Business Health Options Program (SHOP) Marketplace.

Q: What is the SHOP Marketplace?

A: The SHOP Marketplace is an ACA-created platform where small businesses can compare and purchase health insurance plans. It allows employers to set a budget, offer multiple plan options, and potentially qualify for the Small Business Health Care Tax Credit.

Q: How does the ACA define a full-time employee?

A: Under the ACA, a full-time employee is one who works at least 30 hours per week or 130 hours per month. This definition is crucial for calculating full-time equivalent employees to determine if a business is classified as an Applicable Large Employer (ALE) subject to ACA requirements.

Q: What happens if a small business grows to 50 or more employees?

A: If a small business expands to 50 or more full-time equivalent employees, it becomes an Applicable Large Employer (ALE) under the ACA. This means the business must provide affordable health insurance to at least 95% of full-time employees and report coverage details to the IRS to avoid penalties.

Q: Can small businesses use ICHRA to comply with ACA requirements?

A: Yes, an Individual Coverage Health Reimbursement Arrangement (ICHRA) is ACA-compliant and allows employers to reimburse employees for individual health insurance premiums and medical expenses tax-free. This approach offers cost control and flexibility without managing a traditional group health plan.

Q: Are there penalties for not complying with the ACA?

A: Yes, Applicable Large Employers (ALEs) who fail to provide affordable, minimum essential coverage to full-time employees can face penalties under the Employer Shared Responsibility Provisions. These penalties vary based on the number of employees and whether at least one employee receives a premium tax credit for individual coverage.

Q: Do ACA reporting requirements apply to small businesses?

A: Only Applicable Large Employers (ALEs) with 50 or more full-time equivalent employees are required to file Forms 1094-C and 1095-C with the IRS to report offered health coverage. Small businesses with fewer than 50 FTEs are generally exempt from this requirement.

Q: How does the ACA affect self-employed individuals?

A: Self-employed individuals without employees are not subject to employer requirements under the ACA. However, they can purchase individual health insurance through the Health Insurance Marketplace and may qualify for premium tax credits based on income.

Q: Can small businesses offer health benefits without using the SHOP Marketplace?

A: Yes, small businesses can provide health benefits through other options, such as Individual Coverage Health Reimbursement Arrangements (ICHRA) or Qualified Small Employer Health Reimbursement Arrangements (QSEHRA), which offer flexibility and cost control while staying ACA-compliant.