The Affordable Care Act: What Small Business Owners Need to Know

When business owners feel they have a grip on the Affordable Care Act (ACA) and its legal requirements, the federal health insurance policy changes shape again. We’re here to help you cut through the clutter. Here’s the basic rundown of where the ACA stands now and what you need to know as an entrepreneur.

The Basics

You’re probably familiar with the ACA standard that states employers with 50 or more full-time employees have rules to follow. These employers, or “applicable large employers” (ALE), must meet ACA obligations or face penalties. These obligations include:

  • Offer minimum essential coverage that is both affordable and provides minimum value to employees and their dependents
  • Fulfill reporting requirements to demonstrate minimum essential coverage to the IRS.

Not quite to 50 employees yet? You should still document the number of employees you have and monitor your ALE status. One business decision to hire another full-time employee could immediately put your name in the hat for certain ACA compliances, so it’s essential to be prepared beforehand.


So what happens if you don’t provide minimum essential coverage and report those offerings to the IRS? In the most basic sense, you pay up. Failing to cover the ACA standards for an ALE triggers one of two costly employer-shared responsibility payments.

  • Majority Employee Coverage Payment:

    • Triggered if minimum essential coverage is not offered to 95% of full-time employees.
    • At least one of those employees receives a premium tax credit for purchasing coverage through the government health insurance marketplace.
    • Payment equals $2,000 per full-time employee, excluding the first 30
  • Insufficient Coverage Payment:

    • Triggered when an employee obtains a premium tax credit through the health insurance marketplace because the employer’s plan was not affordable, didn’t provide the minimum value, or the employee is outside the 95% covered by the employer.
    • Payment equals $3,000 multiplied by each full-time employee who receives a premium tax credit.

The ACA Today

The most recent tweaks to the ACA happened in 2016 when President Donald Trump used his executive authority to end federal subsidies to open healthcare exchanges and reduce the individual mandate penalty to zero dollars. The latter change meant individuals who chose to go without health insurance would no longer feel trapped by fines and, therefore, feel less obligated to shop on the Marketplace despite their employer’s offerings. Since then, chatter about ACA reform has died down, but the IRS hasn’t forgotten its promised penalties.

IRS’ Slow Collection of Employment Shared Responsibility Payments

The IRS has been behind on collecting payments from employers who’ve failed to meet their 2015 ALE obligations. The first slew of letters notifying employers of their responsibilities, labeled “226J”, were just sent out last year – far behind the government’s decision to implement the consequences. The delay could mean you’ll be forced to dig up old information to get on track. There is a silver lining. If a 226J does arrive in the mail, business owners can either complete an enclosed form in agreement with the IRS’s assessment or rebuttal through one of two snail mail processes.

Comply or Reply

While ACA policies may seem in the air, it’s essential not to ignore your responsibilities as a business owner. Complying with the government’s ACE obligations is the first and foremost way to avoid having to pay up. If you find yourself holding a 226J letter, reply no matter what your take on the IRS’s assessment may be. Avoiding the IRS will only cause the issue to snowball.

Finding the Right Insurance for Your Employees

If you’re feeling overwhelmed about getting your employees insured, the Grigg Group can help! Our experienced team of brokers can shop dozens of markets on your behalf, ensuring you have the best combination of coverage at the lowest cost. Let us guide you to compliance by calling (704) 333-3255 or sending us a message through our contact page..

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