Affordable Care Act: Basic Definitions for Small Businesses

A guide to some health care reform terms that are frequently relevant to small businesses


Affordable Care Act: The health care reform law enacted in March 2010.

Affordable coverage: Refers to employer coverage for which an employee's share of the annual premium (for self-coverage only) is no greater than 9.5 percent of that employee's annual household income.

Agent/broker: A person or business that can help you select and enroll in a health plan through the Health Insurance Marketplace; they can also provide the same service for your employees. Agents and brokers are licensed and regulated by states and typically get commissions from health insurers. Note: Some agents and brokers may only be able to sell plans from specific health insurers.

Employer Shared Responsibility Payment: Refers to the tax payment--or penalty--that employers with 50 or more full-time or full-time equivalent (FTE) employees will have to pay starting in 2015 if they do not offer affordable coverage that meets minimum value to their full-time employees and their dependents.

Full-time employee: An employee who works an average of 30 hours per week.

Full-time equivalent (FTE): A measurement of an employer’s total part-time employees’ hours expressed as the equivalent number of full-time hours. For example, two part-time employees working an average of 15 hours a week would equal one full-time equivalent employee.

Health Insurance Marketplace: A new way for individuals, families and small businesses to compare plans and enroll in coverage. (Also referred to as the exchange.) All Marketplace health plans are private instead of  government administered. The Marketplace also provides information on cost-saving options for people with low to moderate incomes. In South Carolina, the Marketplace is run by the federal government.

Minimum value: A health plan standard. In order to meet this standard, a health plan must be designed to pay at least 60 percent of the total cost of medical services for a standard population.

Self-employed: A business owner with no employees; in other words, a non-employer. A business owner is considered self-employed even if he or she hires independent contractors.

Small Business Health Options Program (SHOP) Marketplace: A health insurance marketplace where employers with under 50 FTE employees can compare health plans and select coverage to offer their full-time employees. Small businesses that purchase plans through SHOP may qualify for a tax credit worth up to 50 percent of the premium costs.


For a complete glossary of terms, visit

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