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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.


Its definitely a very controversial and complicated situation. But thanks for doing a write up on the Affordable Care Act. There's definitely a lot of conflicting opinions but for now, it seems here to stay so its best to just educate yourself as much as you can and if necessary- make the proper provisions for your family or business
There is a lot of confusion out there about the Affordable Care Act. Great to have some clear information.
I have 85 full time and offer ins now but only about 32 take the ins.If I offer ins. in 2014 and have the same 32 to 40 on my ins. will I have to pay the penalty if emp.opps for the goverment ins.
Frizz- Confusing I know!  This post was edited to remove a link. Please review our Community Best Practices ( for more information about how best to participate in our online discussions. Thank you. So that is how it reads, right? In your situation it looks as though you have less than half participating, BUT take into consideration what the government sees- How many of those employees are eligible and using MediCaid/MediCare? How many Employees have coverage elsewhere? And lastly- How many Employees flat out opt out of benefits because they don't want them? Depending on the answers depends on how many employees you have in your ELIGIBLE EMPLOYEE COUNT. Clear as mud isn't it? So let's say even IF you had 85 Employees, of which 32 take benefits, you have a remaining 53 employees who do not participate on your plan... but you just don't know if they participate on another plan elsewhere that removes them from the 53 employee pool. Let's say of those 53 left, 25 of them have a plan they participate in outside of what you offer (Spouse, Parent, MediCare/Medicaid, etc). That leaves you 28 employees- Under the 30 employee count that the gov't gives you as a "freebie" Ask your Benefit broker the benefit of establishing a MERP (Medical Expense Reimbursement Plan), an HSA (Health Savings Account). You can elect 3 plan designs as long as one is an HSA QUALIFIED Plan (Qualified-Meaning you can use your HSA on that plan, but it is not required to have an HSA to participate) Often times- I have clients offer $3K HSA qualified deductible / 100% co-insurance plan; $2,500 deductible / 80% co-insurance plan; $1,500 deductible / 80% plan They will contribute a minimum of 50% to the EMPLOYEE ONLY cost for the HSA plan (Acting as a base plan offered) All of the other plans are offered as a buy-up option that the employee pays the difference on. so if the HSA (Base-Plan) for employee only is $100, the Employer is contributing $60 (or 60%) towards the employee only, that employee has the option to buy-up to the $1,500 plan that costs the Employee $200 a month, but is given an employer contribution credit of that $60- costing the employee $140 for that enriched plan. Those are obviously hypothetical examples- but your broker should be able to work with you and bring you to compliance if that is a concern. At Resourcing Edge (This post was edited to remove a link. Please review our Community Best Practices ( for more information about how best to participate in our online discussions. Thank you.) we design plans as well as work with brokers. Brokers love us because we make sure they KEEP their book of business and not lose it to others in this industry. :) Feel free to contact me if you need any further assistance! We service our clients nationwide, so I can help point you in the right direction! Liberty Prince  This post was edited to remove a link. Please review our Community Best Practices ( for more information about how best to participate in our online discussions. Thank you. That gives their employees OPTIONS, and
it is difficult to carry out the plan because my company only 5 peoples
Do whatever the need to plan, this post useful
With the Affordable Health Care Act likely to remain the law, you will see an increasing reluctance for small business owners to hire full-time employees. They will be more likely to hire part-workers and restrict their hours to (30 hours or less) in order not to be subject to the health care mandate. This is a trend that will not bode well for business owners or their employees.
there are still so many unknowns about what taxes all employers will face, both small and large group employers. It is going to be interesting how the small business owner handles the situation moving forward.
We are a PEO (Prof Employer Org.) that provides Payroll, WC, Insurance etc. for our clients and was wondering how the Affordable Healthcare Act will affect us? I haven't found any specific documentaion related directly to our industry. We provide payroll services as well as WC and offer health insurance to each of our clients. Some clients opt to waive health insurance coverage and some will offer it to their employees. If we offer health insurance and the employees decide to waive coverag, who is ultimately responsible for fines etc. The client we provide payroll service for or our organization? Our client base is over 1000 with more than 13000 employees.
Hello, and thank you for your question. Under the rules for Employer Shared Responsibility, the common law standard is used to determine who is considered an employee’s employer. You can find more information about the common law definition of the employment relationship as it applies to these rules at Another helpful resource for employers can be found at


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