What Small Business Owners Need to Know About the Affordable Care Act

Emma Sturgis

February 25, 2016

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The Affordable Care Act (ACA) requires some small businesses owners to provide health insurance to their full-time employees. The ACA imposes other obligations on small business owners as well, including additional reporting and disclosure requirements. The main provisions small business owners need to understand are as follows:

Duty to Offer Health Insurance

Most business owners are aware that the ACA requires certain employers to offer health insurance. Employers who have an obligation to provide health insurance must do so within 90 days of the date the employee began employment with the company. However, this obligation does not apply to all businesses. Small businesses with less than 50 full-time employees do not have to offer health insurance. Further, full-time employees do not include seasonal workers or those employees who work less than 30 hours a week. Small businesses should consult with experts, especially those with healthcare master's degrees, for help determining which of their employees are qualified for employer-offered health insurance under the ACA.

Incentives to Provide Insurance

The ACA provides incentives to certain small business owners with less than 50 employees who provide health insurance to their employees. Businesses with less than 35 full-time employees who earn less than $50,000 a year may obtain tax credits up to 50 percent of the cost of what they pay toward their employees' insurance premiums. The value of the credit is based on the number of employees and their salaries, with smaller businesses with less highly paid employee receiving the biggest credits. The ACA also allows employers to offer increased incentives to employees who take steps to improve their health through employer-based wellness programs. The reward that employers can offer increased from 20 to 30 percent of the cost of the employee's health insurance premium.

Expanded Insurance Options

Small businesses who wish to provide health insurance to all their employees can do so on the Small Business Health Options Program Marketplace. The Marketplace provides an easy way for small businesses to access affordable insurance plans for their employees and data to evaluate the overall cost of competing plans.

Increased Reporting Requirements

All small businesses, whether they offer health insurance to employees or not, must make information available to all employees regarding the health insurance Marketplace. Small business owners with more than 50 employees have the additional responsibility of reporting to the Internal Revenue Service that they provide health insurance to employees.

The ACA is a complicated piece of legislation. However, by focusing on these key provisions, small business owners can ensure that they are in compliance with its regulations.