Affordable Care Act

Health Insurance for Small Business Under Obamacare

Published on October 09, 2014


Under the Affordable Care Act (ACA or “Obamacare”), businesses with fewer than 50 full-time staff (or the equivalent in part-time workers) aren’t required to provide health insurance to their employees. Since health insurance for small business isn’t mandatory under the ACA, small companies won’t face tax penalties if they don’t provide health insurance for their workers. 

Watch our videos about health insurance for small business

What are my responsibilities as a small employer under Obamacare if I don’t offer coverage?

Will Obamacare eliminate small business health insurance?


Does Obamacare require small employers to provide health insurance?


Health insurance tax credits for small business

Although small businesses aren’t required to provide coverage under Obamacare, small business employers may receive tax credits when they provide health coverage as follows:

  • Employers with 25 or fewer employees with average annual wages of less than $50,000 may be eligible for a special tax credit of up to 50% of the amount the employer contributes toward employee insurance premiums. Employers are required to contribute at least 50% of the total premium cost for employees

Responsibilities of small business

Whether or not they offer health insurance to their employees, it is absolutely critical for small businesses to make their employees aware of their obligation to seek health coverage under the Affordable Care Act. Employees must be made to understand that they have access to guaranteed coverage in the individual market. In other words, they cannot be turned down when they apply during open enrollment or when they experience a qualifying life event.
Small companies that do offer health insurance must also explain to their employees that they may be eligible for government subsidies if the coverage provided by the company is not deemed to be affordable under the law.
However, small companies should be careful about state and federal laws prohibiting them from paying for or endorsing individual health insurance plans in a manner that makes the employees think the plan is actually a group (instead of individual) health insurance plan.
Note that since 2015, businesses with the equivalent of 50 or more full-time employees must provide “affordable” health insurance or pay a tax penalty. 

How much does small business insurance cost? 

In 2016, eHealth published a report on the average premiums and deductibles for small business health care plans. Some findings included:

  • average small group health plan had five members
  • average small group premium was $1,432 per month, and $286 per covered life
  • annual deductibles were $2,306 on average

To help find the right individual health plan for you, enter your zip code where requested on this page to see a quote. For free online quotes for your business, visit our Small Business page.

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