ACA (Affordable Care Act)
Definition
A federal law that reformed health insurance access, affordability, and employer responsibilities.
What is the Affordable Care Act (ACA)?
The Affordable Care Act (ACA), also known as “Obamacare,” is a comprehensive health care reform law enacted in 2010. It aims to increase access to health insurance, improve healthcare quality, and reduce overall costs. For employers, it introduced specific mandates regarding health coverage offerings, reporting, and employee affordability standards.
Why is the ACA Important for Employers?
The ACA established key employer responsibilities, especially for Applicable Large Employers (ALEs) with 50 or more full-time equivalent employees:
- Coverage Mandate: ALEs must offer health insurance to at least 95% of full-time employees or face penalties.
- Affordability Standards: Coverage must cost employees no more than a set percentage of income (8.39% in 2025).
- Minimum Value Requirement: The plan must pay at least 60% of total allowed costs.
- IRS Reporting: Employers must file Forms 1094-C and 1095-C annually.
FAQs
Who does the ACA apply to?
Employers with 50+ FTEs are subject to ACA employer shared responsibility provisions.
What are Forms 1094-C and 1095-C?
They report to the IRS and employees which months of the year coverage was offered, and whether it was affordable.
Are small businesses exempt?
Generally yes, but they may still offer plans through the SHOP exchange and may be eligible for tax credits.
How ExtensisHR Can Help
As part of our benefits administration services, we help employers:
- Track employee eligibility and full-time status
- Offer ACA-compliant health plans
- Calculate affordability using IRS safe harbors (W-2, Rate of Pay, or Federal Poverty Line)
- Prepare and file ACA reports with the IRS
- Stay ahead of federal and state-specific changes to health coverage rules