Affordable Care Act (ACA)

What Is the Affordable Care Act (ACA)?

The Affordable Care Act (ACA) is the most common name and abbreviation HR professionals use for The Patient Protection and Affordable Care Act. Passed by the 111th Congress and signed into law by President Barack Obama in March 2010, the ACA is also known by the popular term “Obamacare.”

What Does the Affordable Care Act Do?

The Affordable Care Act’s primary goal when it comes to healthcare is to extend healthcare coverage to more Americans. The ACA reshaped benefits administration through new regulations, fines, and penalties.

For Employees

Affordable Care Act (also called Obamacare) rules that affect employees include:

• An individual mandate requiring most Americans to prove they have medical insurance
• Tax credits that partially (or totally, in some cases) subsidize premiums for those with household incomes falling between 100% and 400% of the federal poverty level
• Expand the Medicaid program so that states can choose to cover all adults with incomes that fall below 138% of the federal poverty level
• Permission for employees to keep children on their insurance plans until the age of 26

While the ACA originally included tax penalties for those who didn’t have medical insurance, those penalties were repealed in 2017.

For Employers

Under the ACA, employers must adhere to the following:

• New standards for determining who counts as a full-time employee in these mandates
• A requirement for employers of 50 people or more to offer health insurance

If employers do not follow these rules, they may incur hefty fees to be paid to the IRS.

For Insurance Companies

The ACA significantly affects how insurance companies operate in the following ways:

• The creation of health insurance marketplaces
• New standards for health plans to qualify as ACA-compliant coverage, with no annual dollar or lifetime limits on essential health benefits
• New laws against denying coverage due to pre-existing conditions and canceling policies because of illness
• New regulations that prevent insurers from charging higher insurance rates based on gender or gender identity
• Rules that demand insurance companies spend at least 80% of employee premiums on healthcare coverage instead of overhead or profit

While there are ongoing legal challenges to these mandates, no widespread changes have been made regarding Affordable Care Act insurance rules.

How Does the Affordable Care Act Impact Business Owners and HR Professionals?

ACA compliance issues complicate the process of administering medical benefits. HR professionals need to explain how the ACA affects their employees’ benefit choices during open enrollment so that employees can make the best choice for their health and their financial situation.

Under the ACA’s employer mandate, certain applicable large employers (ALEs) with 50 or more full-time employees (or full-time equivalent employees when you take employment status into account) are required to offer affordable healthcare coverage through a shared responsibility model.

Employers that do not follow the mandate may be required to make employer-shared responsibility payments to the IRS.

As an HR professional, you should be aware that non-ALEs (small businesses with fewer than 50 full-time employees) still have requirements under the ACA. For example, you may be required to report certain employee information to the IRS, even if you choose not to offer health insurance coverage.

If you offer health insurance coverage to even one full-time employee, you must offer it to all employees within 90 days of their hire date.

If they need coverage sooner, they can enroll in a marketplace plan, as changing jobs is considered to be a qualifying life event that allows them to enroll outside of the Affordable Care Act open enrollment period.

You must also ensure employees receive an Affordable Care Act Summary of Benefits and Coverage. This explains critical information about their healthcare plans and options.

The ACA’s health insurance marketplace provision has led to the creation of the Small Business Health Options Program, where small businesses that want to provide health and dental coverage can enroll through private insurance companies or through a broker. These plans allow businesses to qualify for credits to lower premium costs.