How the Affordable Care Act affects small businesses

How the Affordable Care Act affects small businesses

The Affordable Care Act (sometimes called the health care law, or ACA) established the Small Business Health Options Program (SHOP) for small employers (with 1 - 50 full-time equivalent employees) that want to provide health and dental coverage to their employees.

For coverage starting January 1, 2018, employers can enroll in SHOP through private insurance companies, or with the help of a SHOP-registered agent or broker. SHOP plans are generally the only way to qualify for the Small Business Health Care Tax Credit to lower premium costs.

But other parts of the health care law may also affect employers.

Required reporting about the Marketplace to your employees

Employers are required to provide certain information about the Marketplace to their employees, whether they offer health insurance or not.

90-day maximum waiting period

If you offer health insurance to your employees, you must offer it to all eligible employees within 90 days of their employment start date. Learn about the 90-day waiting period from the IRS (PDF).

Summary of Benefits and Coverage (SBC) disclosure rules

Employers must provide employees with a standard "Summary of Benefits and Coverage" (SBC) form explaining what their health plan covers and what it costs. The purpose of the SBC is to help employees understand their health insurance options. You could face a penalty for non-compliance. Learn more about SBCs and see a sample completed form.

Flexible Spending Accounts (FSAs)

Employees can't contribute more than $2,650 to their Flexible Spending Accounts per year in tax year 2018. That limit doesn't apply to employer contributions to the employees' FSAs. Employers have two options to let employees carry over unspent FSA funds into the following plan year. Learn more about these options (PDF).

Workplace wellness programs

The Affordable Care Act creates incentives to promote employer wellness programs and other activities that support healthier workplaces. The maximum reward to employers using a wellness program that's contingent on employee health has increased from 20% to 30% of the cost of health coverage. The maximum reward for programs designed to prevent or reduce tobacco use is 50%. Learn more about wellness incentives.

Employer Shared Responsibility Payment

Businesses with 50 or more FTEs that don't offer insurance that meets certain minimum standards, may be subject to the payment. Learn more about the Employer Shared Responsibility Payment from the IRS.

Reporting information on health coverage by employers and insurance companies

The health care law requires the following organizations and some other parties to report that they provide health coverage:

  • Employers with 50 or more FTEs
  • Health insurance companies
  • Self-insuring employers of any size

Learn more about these reporting requirements from the IRS.

Medical Loss Ratio rebates

Insurance companies must spend at least 80% of premium dollars on medical care. Insurance companies that don't meet this requirement must provide rebates to policyholders — usually an employer that provides a group health plan. Employers who get these premium rebates must allocate the rebate properly. Learn more about federal tax treatment of Medical Loss Ratio rebates from the IRS.

More health care resources for businesses