What is Obamacare and how does it affect my business?

Written for ACAwise, product of SPAN Enterprises


Obamacare, officially known as The Patient Protection and Affordable Care Act (ACA), is a health reform law that was signed by President Barack Obama in March 2010. The law was created to give people and their families quality, affordable healthcare coverage. It requires health insurance companies and employers to provide better health insurance options.

Under the ACA, employers with at least 50 full-time employees or the equivalent of an average of 50 full-time employees in the prior calendar year are considered large employers and must provide 95 percent of full-time employees with minimum value and affordable healthcare coverage.

Businesses that don’t comply with this requirement will be fined if employees seek insurance and gain tax credits via the federal and state health insurance marketplace.

Employers may determine if they’re required to provide health insurance to employees by adding together the total number of full-time employees per month and then dividing that number by 12.

For Example: January through October, you have 60 full-time employees on the payroll every month and November through December, you have 45 each month.

January: 60

February: 60

March: 60

April: 60

May: 60

June: 60

July: 60

August: 60

September: 60

October: 60

November: 45

December: 45



Adding these totals to 690 and then dividing that number by 12 gets you the average employee count per month.

690/12 = 57.5 employees per month

According to this calculation, the employer would meet the requirement of 50 full-time employees and therefore, be required to provide health insurance for the next calendar year.

Determining who is full time and eligible can get tricky if you have a lot of employees and their hours vary over the year.

In order to be compliant, the health insurance must meet the minimum value of 60 percent of out-of-pocket costs for the insurer. Other requirements include: free annual wellness checkups, free preventive care, and a maximum cost for emergency care. The insurance plan must also include coverage for dependents (not spouses) up to 26 years old. The insurance plans should not cost the insurer more than 9.56 percent of the employee’s household income.

If applicable employers do not meet insurance coverage requirements, the government will fine the company $2000 per full-time employee minus the first 30 employees.

For Example: You have 80 full-time employees and don’t offer coverage. You can expect to get fined for 50 out of the 80 employees. The total fine cost will be $100,000.

80 – 30 = 50

50 x $2000 = $100,000

There’s another fine for employers that provide health insurance that doesn’t meet minimum value (affordability) and the other ACA insurance standards mentioned above. This fine is the lesser of $3000 per full-time employee receiving government subsidies OR $2000 per full-time employee minus the first 30 employees (same as the aforementioned example).

Small businesses are not required to offer health insurance; however, these businesses may be eligible for tax credits if coverage is provided. Employers who have less than 25 full-time workers who earn less than $50,000 in average annual wages are eligible for tax credits.

Also, businesses with 100 or less full-time employees may receive up to a 50 percent tax break on employee health insurance premium costs when using the Small Business Health Options Program.

If you’re still concerned about ACA requirements and managing all the information you need to determine eligibility and file information returns with the IRS, check out ACAwise. This cloud-based program helps you meet IRS compliance and manage evolving employee status and requirements throughout the year.

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