According to healthcare.gov, the Affordable Care Act has three goals:
- Make affordable health insurance accessible to more people. The Act provides consumers with subsidies (“premium tax credits”) that reduce health insurance costs for households with incomes between 100% and 400% of the federal poverty level (FPL).
- Expand Medicaid program coverage to all adults with income below 138% of the FPL. (Not all states have expanded their Medicaid programs.)
- Support innovative medical-care delivery methods designed to reduce health care costs generally.
The law affects both individuals and companies. For example, the law:
- Requires insurance plans to cover individuals with preexisting health conditions, including pregnancy, without charging more
- Ensures individuals have access to free evidence-based preventative care, such as vaccines and cancer screenings
- Gives more coverage options to young adults
- Prohibits lifetime and yearly monetary limits on coverage of essential health benefits
- Holds insurance companies accountable for rate increases as they must now publicly justify any unreasonable rate hikes
- Helps individuals understand the coverage they’re getting
- Makes it illegal for health insurance companies to cancel health insurance coverage just because an individual gets sick
- Protects individuals’ choice of doctors, allowing them to choose the primary care doctor they want from their plan’s network.
- Protects individuals from employer retaliation if they report violations of the ACA by their employer or are receiving a health insurance tax credit or cost-sharing reduction to purchase health insurance
Business rules and benefits
Small companies — typically those with fewer than 50 employees — can purchase insurance through the Small Business Health Options Program.
Such companies:
- Must withhold and report an additional 0.9% on employee wages or compensation that exceeds $200,000.
- May be required to report the value of the health insurance coverage they provided to each employee on their Form W-2.
- Must file an annual return reporting specific information for each employee they cover if they provide their employees with self-insured health coverage
Companies may be eligible for the Small Business Health Care Tax Credit if they have fewer than 25 full-time equivalent employees and pay at least 50% of their full-time employees’ premium costs.
Some states allow employers with up to 100 employees to purchase insurance through SHOP. They must offer coverage that’s affordable and that provides minimum value to their full-time employees (and offer coverage to the full-time employees’ dependents) or potentially owe an employer shared responsibility payment to the IRS.
The latest updates
The IRS announced annual adjustments to the ACA in mid-2022. The “2023 health plan affordability threshold—used to determine if an employer’s lowest-premium health plan meets the Affordable Care Act’s (ACA’s) affordability requirement—will be 9.12 percent of an employee’s ‘household income,’ down from the 2022 limit of 9.61 percent,” according to the Society for Human Resource Management.
This means that beginning January 1, 2023, employers offering health plans to their ACA full-time workforce must ensure the contribution amount is no more than 9.12% of their household income.
Of course, this is simply an intro to a multifaceted series of provisions. If you have questions about your personal coverage or a company you manage, always work with qualified experts to ensure you’re following the ACA’s provisions — and receiving everything you’re entitled to.
