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Exploring coverage options for 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 (generally those with 1โ€“50 full-time and full-time equivalent employees (FTEs)) who want to provide health and dental coverage to their employees.
Certain 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

Certain 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 when they become eligible for health coverage.ย Learn about the 90-day waiting period from the IRSย (PDF, 40.4 KB).

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.ย Get details about SBCs and see a sample completed form.

Flexible Spending Accounts (FSAs)

Employees can't contribute more than the annual dollar limit set by the IRS to their Flexible Spending Accounts. That limit doesn't apply to employer contributions to the employees' FSAs. Employers have 2 options to let employees carry over unspent FSA funds into the following plan year.ย Get more information from the IRSย (PDF, 1.2 MB).

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%.ย Learn more about wellness incentives from the Department of Labor.

Employer Shared Responsibility Payment

Certain businesses with 50 or more full-time and full-time equivalent employees that don't offer insurance that meets certain minimum standards may be subject to the payment.ย Get details about the Employer Shared Responsibility Payment from the IRS.
No small employer, generally those with fewer than 50 full-time and full-time equivalent employees, is subject to the Employer Shared Responsibility Payment, regardless of whether they offer health insurance to their employees.

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 to their employees:
  • Certain employers, generally those with 50 or more full-time and full-time equivalent employees
  • Health insurance companies
  • Self-insuring employers of any size

Medical Loss Ratio rebates

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

If you already offer health insurance to your employees

If you offer health insurance to your employees that is not through SHOP, you can keep the coverage you have. In general, offering a SHOP plan is the only way to qualify for theย Small Business Health Care Tax Credit.

IRS resources for small businesses

The IRS offers several resources to help employers:

More resources for small businesses

There are many health insurance products and services that are available for small businesses and their employees.ย Learn more about other health insurance products and services that may be available.