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Myth vs. Fact- Myth #1: All Businesses Will Be Required to Provide Health Insurance to All of Their Employees

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Myth vs. Fact- Myth #1: All Businesses Will Be Required to Provide Health Insurance to All of Their Employees

By Meredith K. Olafson, SBA Official
Published: February 20, 2013 Updated: February 20, 2013

As a business owner, it’s important to understand how the Affordable Care Act can affect your business. However, with so many misconceptions about how the Affordable Care Act works, this can be difficult.  To clarify the myths versus facts, we’re launching a new blog series called “Myth vs. Fact: The Affordable Care Act and Small Business”.

This blog covers one of the most common myths we’ve seen out there: All businesses will be required to provide health insurance to all of their employees.

Fact: Employers are not required to provide coverage to their employees under the Affordable Care Act.  However, starting in 2014, some businesses that do not offer health coverage to their full-time employees may be subject to a shared responsibility payment under the health care law.

How do I know if I may be subject to an Employer Shared Responsibility Payment?

Businesses with 50 or more full-time or full-time equivalent (FTE) employees that do not offer affordable health insurance that provides a minimum level of coverage to their full-time employees (and dependent children under the age of 26 starting in 2015) may be subject to a shared responsibility payment if at least one of their full-time employees receives a premium tax credit in an Affordable Insurance Exchange, or Marketplace.   For the purposes of these provisions, a full-time employee is one who is employed an average of at least 30 hours per week.

Businesses will not be affected by these provisions if they already offer affordable health coverage that provides a minimum level of coverage to their full-time employees, which is the vast majority of these businesses.

Businesses with fewer than 50 full-time or FTE employees are generally not affected by these provisions.  However, it’s important to know that if companies have a common owner or are otherwise related, their total combined number of employees is used to determine whether each separate company is subject to these provisions — even if none of the member companies individually employ 50 or more full-time or FTE employees.

How can I find out if I meet the threshold number of 50 or more full-time or FTE employees?

To assist employers, the IRS has developed a helpful set of Q&As on the Employer Shared Responsibility provisions. The IRS has also issued a set of proposed rules relating to the Employer Shared Responsibility provisions, and is accepting written or electronic comments by or before March 18, 2013.  

About the Author:

Meredith K. Olafson

SBA Official

Meredith K. Olafson is Senior Policy Advisor for the U.S. Small Business Administration where she oversees the agency's education and outreach efforts around health care and the Affordable Care Act.


This health care act can be kind of confusing, thanks for giving us the facts.
I think many small companies would just hire more part time employees even some freelancers, some small alternative medicines and healthcare company owner just can do more work. It is hard time but we still need to go forward!
Nice article. As the deadline for the ACA approaches, I know a lot of business owners are feeling dread. Many of us will have to spend some decent time doing research or paying somebody to do the research for us to make sure things get done the "right" way.
Hello, So my question is... What percentage of the premium does the Employer have to cover in order not to face penalties?? Everything I'm reading keeps referring back to the requirements of: Company selected insurance must pay for at least 60% of covered health care expenses and that the employee can not pay more than 9.5% of family income for the employers coverage. But these statements don't really answer my question.... Say the insurance premium is a $100 per month- what portion of that $100 does the employer have to cover?? Thank you! Sheri
This is a great topic and pretty much the buzz among pest control companies right now. If you have many territories that you service it takes a certain number of employees to handle. We have specialists who do just termite extermination, ant control, wildlife control and our other bugs of choice (i.e. bed bugs, spiders, etc.) We are finding many companies are turning to staffing agencies to alleviate the painful expense and to reduce the number of employees to the minimum number. With the staffing agencies we are finding companies to hire people via this avenue then they are not considered a full-time employee but rather a temporary one. It will be interesting to see how the health care act will affect pest control companies in our area. We service Connecticut, New York and Massachusetts.
So who is auditing the insurance carriers and their 80/20 rule? Are they allowed to count the discount they provide as in-network as part of their operating expenses? Does the law still allow the providers to take the same deduction and add that to their operational cost? Does the law still allow the providers of trauma centers to use this discount as their operating expenses that are used to raise their cost of healthcare by up to 10% every year without the state insurance agencies even raising an eyebrow? Just wondering if we're going to force millions more into a broken system and call it good?
Thank you for your question about the 80/20 rule, also commonly known as the Medical Loss Ratio (MLR) rule. Insurance companies submit their annual MLR reports for coverage provided to the U.S. Department of Health and Human Services (HHS). Based on this data, insurance companies that don’t meet the 80/20 rule must rebate the portion of premium dollars that exceeded this limit. For more information about the rule, rebate amounts issued, and related data, visit You can find a more in-depth report from HHS on application of the 80/20 rule here:
its difficult to get this plan with little people.
Hello Meredith, I am developing a training workshop for my local community college on the federal healthcare mandate and will be launching a website soon. Can you help me with information collection? Thanks, Don
Hi Don,  Try getting in touch with a local Small Business Development Center or SCORE, two of SBA's resource partners. They're located across the country and provide free business counseling and answers. Visit our local assistance guide to find your local SBA resource partners by entering your zip code.


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