How Does the Health Care Law Affect My Business?

Health Care Law Requirements and Reporting

New Health Care Law and Your Business
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The Patient Protection and Affordable Care Act of 2010, otherwise known as "Obamacare," the ACA, or the "Health Care Law," affects small and large businesses in several ways. How the health care law affects your business depends on the number of people you employ, either full-time or part-time (not counting independent contractors).

For Smaller Employers 

Businesses that employ fewer than 25 full-time equivalent (FTE) employees may be eligible to receive a small business health care tax credit for providing health care coverage to employees. 

First, you must determine the number of full-time equivalent (FTE) employees, including each part-time employee as a percentage of a full-time employee. Then you must cover at least 50 percent of the cost of health care coverage for some of your employees, based on the single-person rate, and you must pay average annual wages below $50,000. I

If you meet all of these qualifications, you must apply on IRS Form 8941 (PDF) to receive the tax credit when you file your business tax return.

Small businesses with fewer than 50 employees are eligible to purchase health insurance for employees through a state or federal insurance exchange. 

For Larger Employers

The major provision of the Affordable Care Act that affects larger employers is the Employer Shared Responsibility Mandate.

Under this provision, larger employers (50-99 employees) must provide affordable health insurance coverage to employees or face penalties.

Employers with 100 or more employees don't have to offer coverage to all employees; they must offer coverage to 95% of employees to avoid tax penalties. 

How the Employer Mandate Works

The health care law doesn't "require" larger employers to provide health care to employees, but the law imposes penalties on businesses with over 50 employees that don't provide "affordable" health care to employees.

Large businesses (those with 50 or more full-time workers) that must provide health coverage and do not provide adequate health insurance will be required to pay an assessment if their employees receive premium tax credits to buy their own insurance.

These assessments will offset part of the cost of these tax credits. The assessment for a large employer that does not offer coverage will be $2,000 per full-time employee beyond the company's first 30 workers.

To be deemed "affordable," the health care insurance provided by the employer must pay for at least 60 percent of covered health care expenses, and employees may not be forced to pay more than 9.5 percent of their family income (before deductions and adjustments) for coverage offered by employers.

If a business fails to provide any coverage or the coverage is deemed not to be affordable, the amount of the penalty is $2,000 per worker, but the first 30 workers are excluded from the calculation.

Minimum Acceptable Health Plan

To avoid the penalty imposed on larger businesses, the health plan they offer their employees must meet a minimum acceptable requirement.

The U.S. Department of Health and Human Services (HHS), on its healthcare.gov site), describes a "comprehensive package of items and services, known as “essential health benefits.”

Reporting Requirements

Larger employers (with over 50 employees) must also file reports on the health care coverage they provide employees, giving copies both to the IRS and to the employees for their tax returns.

The employee reports are for the purpose of enabling employees to show they have health care coverage. 

Seasonal Workers and Seasonal Employees

The ACA recognizes two categories of seasonal employees, depending on how much and how often they work.

  • Seasonal workers: hired on a temporary basis, such as for the holidays (fewer than four months or 120 hours).  
  • Seasonal employees: hired occasionally and for six months or less each year, like summer workers. 

If your total number of employees is over 50 full-time equivalents and some of those were seasonal workers (not seasonal employees), those seasonal workers aren't counted in your count for the purpose of determining whether you are a "large employer." 

More information on how the Affordable Care Act affects your small business is available from the Health and Human Services Healthcare.gov site.

The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.