What Is the Affordable Care Act (ACA)?
The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act, is a major healthcare reform law passed on March 23, 2010. Also commonly referred to as “Obamacare,” this federal legislation was designed to improve access to health coverage and reduce healthcare costs across the United States. Among its key components is a requirement for certain employers to provide health insurance or potentially face financial penalties.
ACA Objectives: What the Law Aims to Do
The ACA serves several major goals:
- Widen access to health insurance by offering subsidies (premium tax credits) to individuals and families earning between 100% and 400% of the federal poverty level.
- Expand Medicaid eligibility for low-income individuals earning below 138% of the federal poverty threshold—though expansion varies by state.
- Control healthcare costs by encouraging better delivery systems and supporting efficiency in patient care.
Understanding the Employer Responsibility Provision
One major part of the ACA is the employer mandate, also called the Employer Shared Responsibility Provisions:
| Requirement | Description |
|---|---|
| Applicable Large Employers (ALEs) | Businesses with 50+ full-time or full-time equivalent employees must provide coverage to at least 95% of full-time staff. |
| Affordability Standard | For 2024, employee premiums must not exceed 8.39% of household income. |
| Coverage Standards | Health plans must offer minimum essential coverage that includes services such as mental health care, emergency services, and hospitalization. |
| IRS Reporting | ALEs must file yearly reports with the IRS and provide coverage statements to employees. |
| Penalties | Non-compliance, failing to offer affordable and adequate coverage, may result in financial penalties enforced by the IRS. |
The ACA is jointly managed by the Departments of Health and Human Services, Labor, and the Treasury.
What Is the Health Insurance Marketplace?
To simplify access to coverage, the ACA introduced the Health Insurance Marketplace, an online and phone-accessible service where individuals and small employers can shop for insurance. The federal government operates healthcare.gov for most states, while others run their own exchanges.
Ways to access the Marketplace:
- Call 1-800-318-2596
- Visit healthcare.gov
- Seek in-person help from licensed agents or brokers
In addition to health coverage, people can browse dental and vision plans and determine eligibility for Medicaid or CHIP (Children’s Health Insurance Program) through the application process.
Small Businesses and SHOP
Small employers (1–50 full-time employees) may choose to offer group health insurance via the Small Business Health Options Program (SHOP). While these businesses are not subject to the ACA’s employer mandate, they may qualify for the Small Business Health Care Tax Credit if they:
- Employ fewer than 25 full-time workers
- Pay average wages of about $56,000 or less
- Contribute at least 50% of employees’ premiums
- Offer SHOP coverage to all full-time team members
Employers can enroll in SHOP coverage directly with an insurance provider or through a SHOP-certified agent. Alternatively, they might consider reimbursement strategies like QSEHRA (Qualified Small Employer HRA) or ICHRA (Individual Coverage HRA).
Using the ACA in a Sentence
“Because we’re an applicable large employer under the ACA, we provide health insurance not only to comply with the law, but to better support our team.”
Key Terms Related to the ACA
- Employer
- Employee
- Cafeteria Plan
- TPA (Third-Party Administrator)
- Turnover Rate
Explore More with Beyond
- Benefit requirements for small businesses
- Understanding the 90-day waiting period
- How to complete Form 1095-C
Beyond supports businesses in navigating compliance and employee benefits, helping you stay informed and prepared at every stage of your company’s growth.