How the ACA Affects Employers With Less Than 50 Employees

Employers with less than 50 employees — here’s what you need to know about the Affordable Care Act (Obamacare) mandate.

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ACA requirements, plus background on the Small Business Health Options Program (SHOP)

As the craziness of 2020 begins to come to a close, most everyone, including small businesses, are looking forward to a better year in 2021 and are planning in all kinds of ways to make that happen.

If you’re a small business employer that has been weathering a global pandemic for almost the entire year, healthcare benefits are probably on your mind. Whether you are looking to offer health insurance for the first time, are looking for better healthcare alternatives for your employees, or your business has grown and you’re wondering if your business is now impacted by the Affordable Care Act (ACA) requirements, there can be a lot to comb through.

Luckily, we’ve done most of the preliminary research for you. Here’s everything you need to know about how the ACA (otherwise known as Obamacare) impacts your small business — especially if you have less than 50 full-time employees.

Is my small business subject to the ACA employer mandate?

The Affordable Care Act mandates that any employers with 50 full-time or full-time equivalent (FTE) employees offer their full-time employees and their eligible dependents health insurance. If you have less than 50 employees, you’re exempt from the mandate, but that doesn’t mean that Obamacare isn’t something you should look into. It still has plenty to offer small business owners.

Some states consider companies with 51-100 employees small businesses that are exempt from the requirements. Be sure to check out the rules in your particular state.

If you have less than 50 employees, you’re exempt from the mandate, but that doesn’t mean that Obamacare isn’t something you should look into. It still has plenty to offer small business owners.

Understanding the ACA’s SHOP option

Don’t worry, businesses with less than 50 full-time employees aren’t left out to dry — they’re simply exempt from the mandate that requires those with 50 or more full-time employees to offer affordable insurance. If you still want to offer health or dental insurance to your workers though the Marketplace, the Small Business Health Options Program (or SHOP for short) is for you.

You can enroll in SHOP through either a private insurance company or with the assistance of a SHOP-registered agent or broker. Unlike the requirement put upon larger employers, small businesses that use SHOP can choose to offer health only, dental only, or both. You can also choose from a variety of plans with different coverage options and you decide how much (if any) you as the employer contribute to the costs.

The best part? If you have less than 25 employees, you can qualify for the Small Business Health Care Tax Credit if you offer SHOP to your employees.

Are there requirements I have to meet for SHOP?

If you do choose to offer health insurance, then you will have to meet some mandates:

  • You have to offer coverage to all full-time employees. You don’t have to offer it to part-time or seasonal employees, but you can if you’d like.
  • Enroll at least 70% of the employees you offer insurance to in order to enroll outside of the open enrollment period. Employees with alternative insurance coverage options aren’t counted as rejecting your business’s health insurance. Also, some states have different minimum participation requirements, so you’ll want to check out the rules for your specific state. If you don’t meet the minimum participation requirement, you can enroll during the November 15 – December 15 open enrollment period during any year. This is when the participation requirement is waived.
  • You must have an office or “employee work site” within the state where you plan to use SHOP coverage. This Healthcare.gov page can help you pick which SHOP plan you want based on your state.
  • If you do offer coverage, you’ll have to offer a standard benefits and coverage summary to your employees. These summaries explain the coverage options available to your workers.
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