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Who has to offer health insurance under Obamacare?

The lowdown...
  • Only businesses with fifty employees or more must offer health insurance
  • Only full-time employees are eligible for this insurance
  • Rejecting the insurance is always an option
With all the regulations and rules surrounding healthcare, you might wonder who is mandated to offer health insurance.

Certain groups are required to offer health insurance while others are not. There is an important distinction to be made between those who have to offer health insurance and those who have to obtain it.

Under the Affordable Care Act, every American citizen is required to obtain health insurance or face a fee.

However, the rules are different for those who have to offer health insurance. Generally speaking, those who have to offer health insurance are employers, though there are other entities required to do so as well.

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Employers with more than Fifty Full-Time Employees

The employer insurance mandate only applies to companies that have more than 50 full-time employees. In the event that the company has fewer than 50 full-time or full-time equivalent employees, they are not required to offer coverage under the Affordable Care Act.

The companies that do must offer coverage to their full-time employees as well as any dependents, but this requirement does not extend to spouses of full-time employees.

Only larger companies are legally mandated to offer coverage under the Affordable Care Act and many companies will not be affected by this requirement.

The Overwhelming Amount of Small Businesses in the US

One important fact to consider when discussing this topic is the very high number of small businesses in the United States.

According to the United States Treasury Department, approximately 96 percent of employers in the United States are classified as small businesses.

The newer small businesses might have fewer than 50 full-time or FTE employees, so they are exempt from this insurance mandate. Due to this number of small businesses, the insurance mandate might have more limited effect than it would otherwise.

The Difference Between Full-Time and Full-time Equivalent Employees


One term that has already been used several times in this article is FTE, or full-time equivalent. There is a critical difference between full-time employees and full-time equivalent employees.

Full-time employees are considered such if they work a minimum of thirty hours a week.

They are also considered full-time employees if they work for 130 hours in a standard month. Full-time equivalent employees are those who work for similar hours as full-time employees, but they are only employed by season or have unusual schedules.

Minimum Value

In addition to offering insurance, the insurance offered by larger companies to their full-time staff has to meet the “minimum value” requirements.

Minimum value means that the health insurance pays for at least 60 percent of the total medical cost for a population in terms of its definition by the federal marketplace.

Health insurance offered by employers also has to cover a “substantial amount” of the cost for inpatient hospital and physician services.

Following this minimum value rule exempts employers from any fees that they would incur from the federal government due to non-compliance.

Penalties for Not Offering Affordable Coverage


The minimum value rule is simply one regulation that employers mandated to offer coverage under the Affordable Care Act have to follow.

In order to be considered “affordable,” the health insurance coverage may not cost more than 9.66 percent of an employee’s annual income.

Businesses that do not follow this affordability regulation will have to pay a $3,000 penalty for each full-time employee that finds insurance elsewhere.

If the company does not provide any health insurance, their penalty is calculated at $2,000 per full-time employee. Companies can now subtract their original thirty full-time employees from these fees.

Potential Benefits for Small Businesses

While small businesses are exempt from this regulation under the Affordable Care Act, they might actually be eligible for benefits resulting from the legislation.

If the small business owner operates a company with less than 25 employees and their average annual salaries are less than $50,000, they could qualify for a federal tax credit.

These tax credits are designed to give incentive for compliance with the Affordable Care Act, since much of the legislation is actually made to benefit smaller businesses as much as possible with health care legislation.

What Does Obamacare Mean for the Self-Employed?


Obamacare, also known as the Affordable Care Act, does affect those Americans who are considered self-employed as well.

One unique feature of the Affordable Care Act for the self-employed is that you and your dependents’ health insurance premiums are fully deductible on your tax return.

However, self-employed individuals are still required to obtain insurance under the Affordable Care Act or pay the tax penalty outlined in the bill.

It is likely that many of the small business tax credits mentioned earlier also apply if you are self-employed, especially if you run a business.

Small Businesses and Large Businesses

One part of the Affordable Care Act that has been discussed in great detail is that large businesses are required to offer affordable health insurance or face the consequences.

However, knowing what constitutes a large business and what constitutes a small business is essential to understanding your obligations under the law.

  • A large business is one that employs from 50 up to 90 full-time or full-time equivalent employees.
  • A small business is considered a small business if it has a maximum of 50 or fewer full-time employees working for it.

An Important Fact About Health Insurance


One important fact about the health insurance discussed in this article is that while certain employers are now obligated to provide it, their employees do not have to accept it.

If the insurance is not affordable for the employee, they have the option to look elsewhere for affordable health insurance.

Additionally, if more affordable insurance is available outside the workplace, employees are free to explore those options.

Employees also do not have to accept it if it does not provide sufficient coverage. This is relative, but if it can’t cover you, you might want to find different insurance.

Part-Time Employees

As well as knowing what constitutes a small and large business, one fact that must be brought up is the contrast between full-time employees and part-time employees.

The definition of full-time employees was discussed earlier, but it is employees who work at least 30 hours a week.

Part-time employees are any employees that work less than this amount per week. This amount can range from 15 to 25 hours, but in any case, they are part-time employees.

Part-time employees are not eligible to have employer mandated health insurance under the Affordable Care Act.

The question of who has to offer health insurance under Obamacare or the Affordable Care Act is a good one to ask.

Generally speaking, the answer is large employers and large businesses, but some larger small businesses might fall under the requirements due to their classification under the law.

Either way, the requirement to offer health insurance is further restricted by the fact that health insurance only has to be offered to full-time employees.

Employees can also choose to reject the health insurance they are offered. It is completely within their power if they find a better option for insurance.

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