The Affordable Care Act and Small Businesses

(NOTE: This is a very, very, very basic overview of the Affordable Care Act as it relates to small businesses. I will be going into more detail in other blog posts in the months to come.)

My small business clients are, universally, afraid of the Affordable Care Act.

So am I.

I learn new things about the ACA on a weekly basis. Typically it’s something I’ve stumbled across while researching something else.

It’s scary, because I always wonder what else I’m missing. I’ve researched the ACA, given presentations on it, taken continuing education, and still I learn new and surprising things on a weekly basis.


But the typical small business can breathe easy regarding one aspect of the ACA: the ACA does not require your business to offer health insurance to your employees.

50 or More Full-Time Equivalent Employees — Algebra Time!

The ACA requires companies with 50 or more “full-time equivalent” employees to offer health insurance. This requirement starts in 2016 for companies with 50-99 employees, and 2015 for companies with 100 or more.

If your business is nowhere near 50 employees, you’re in the clear.

But if you are close to 50 or above 50, how do you know if you’re affected?

Sharpen your pencils — it’s algebra time!

The definition of a full-time employee for this part of the ACA is: any employee who works 30 or more hours per week.

So, you’ll need to go through your entire workforce and determine the average number of hours worked per week. Employees who work 30 or more hours/week count as 1 full-time employee. Employees who work less than 30 hours/week count as a fraction of 1 full-time employee.

For example, an employee who works 20 hours/week would count as 0.67 of a full-time employee.

(This is a gross oversimplification of the process. If this affects you, consult with your accountant and/or insurance person to get more details about things like the “look-back period” and other things you need to take into consideration.)

After you’ve completed this exercise, you add up the “full-time equivalent” number assigned to each employee. If you reach 50 or more, you’re required to provide insurance or pay a penalty.

ACA Affects Us All

That’s not to say the ACA doesn’t affect small businesses at all. It affects all of us in some way, because of the “individual mandate.” But that’s a different blog post for a different day.