Navigating the U.S. healthcare system can be confusing, especially for small to mid-sized businesses needing to provide compliant healthcare plans for their employees. Since passing in 2010, the Affordable Care Act (ACA), commonly known as “Obamacare,” has aimed to make health insurance more accessible for Americans.
However, the ACA brought health insurance reforms and tax provisions that impacted businesses, mandating companies with 50 or more full-time employees to offer health insurance or face significant ACA fines. Many small businesses have struggled to afford comprehensive health insurance for their employees. This results in minimal coverage that fails to support employees or leaves the organization non-compliant and facing penalties.
Before heading into 2025, it is important to be informed of ACA regulations to avoid fines and meet compliance deadlines. With a few new updates for 2025 and speculation about potential policy shifts under the incoming presidential administration, now is the time to act.
This article will provide an overview of the key ACA updates for 2025 requirements for businesses, important dates and deadlines, and strategies to help your organization ensure compliance without breaking the bank.
Key ACA Updates
Below, we break down changes for 2025 to help your company navigate the upcoming requirements and ensure you’re prepared.
Understanding ACA fines for 2025
Any company with 50 or more full-time employees or full-time equivalents is considered an Applicable Large Employer (ALE) and must meet ACA requirements by offering minimum essential coverage (MEC). Failure to comply with ACA mandates can result in substantial penalties that can derail your business goals.
To figure out if you’re considered an ALE, add up the total hours worked by all part-time or hourly employees in a week. Next, divide that number by 30 (for 30 hours per week) to identify your full-time equivalents. Add that number to your actual full-time employee count and if that number is over 50, your business is considered an Applicable Large Employer.
So, let’s break down what the ACA fines are for 2025 and what they mean for your company:
4980H (Part A) Penalty
Part A penalties apply when your company fails to provide minimum essential coverage (MEC) to at least 95% of its full-time employees. For 2025, the Part A penalty is set at $2,900 per eligible employee annually, minus the first 30. So, if you have 60 FTEs, your fine for one year of non-compliance would be $87,000.
It’s also worth noting that the IRS will look back at each year you were out of compliance, so if it’s been several years, expect that number to increase.
4980H (Part B) Penalty
The Part B penalty applies if your company’s offering fails to meet the ACA’s minimum value (covering at least 60% of healthcare costs), is deemed unaffordable for employees, or both.
For 2025, coverage is considered unaffordable if an employee’s contribution exceeds 9.02% of their household income. The Part B penalty for 2025 is $4,350 per employee.
Filing Penalties
Submitting incorrect or incomplete information can also result in ACA fines. The price of these penalties varies but can be substantial.
Here’s what to be aware of:
- IRC Section 6721: A penalty for failing to file an information return or statement accurately and/or on time by the specified due date.
- IRC Section 6722: A penalty for not furnishing a payee statement correctly and/or by the deadline.
Strategies to Mitigate ACA Penalties
The number one way to avoid ACA fines is to familiarize yourself with reporting requirements, including deadlines.
Strategies include:
- Understand ACA compliance requirements thoroughly to avoid oversight.
- Engage a professional to assist with filing and compliance.
- Ensure your employee data is accurate and up to date.
- Ensure you’re accurately calculating your Full-Time Equivalents (FTEs).
- Start early to avoid the last-minute scramble and ensure thorough preparation.
- Meet all ACA-related deadlines to avoid last-minute issues and fees.
What is considered affordable health coverage?
Health coverage is classified as “affordable” if an employee’s contribution for self-only coverage does not exceed a certain percentage of their household income. For 2024, this rate is 8.39%, and it will increase to 9.02% in 2025.
Employers can determine affordability using the following safe harbors outlined by the IRS:
- The employee’s W-2 wages (adjusted for any salary reductions for a 401(k) or cafeteria plan).
- Monthly wages or rate of pay (hourly rate multiplied by 130 hours per month).
- The Federal Poverty Level for a single individual.
If your company meets any of these safe harbors, your offer of coverage is deemed affordable as long as the employee’s required contribution is no more than 9.5% of the baseline. This holds true even if the coverage may not be affordable based on the employee’s actual household income, which is the standard applied for premium tax credit eligibility.
Strategies to Offer Affordable Coverage to Employees
- Work with a licensed agent or broker to identify plans that suit your company’s needs.
- Purchase plans through the Small Business Health Options Program (SHOP).
- Partner with private direct primary care providers like Vitable Health for cost-effective ACA compliance solutions.
Additional ACA fees and compliance requirements
1. 1094-C and 1095-C Forms: These forms help determine an ALE’s compliance with employer-shared responsibility provisions and are crucial for reporting to the IRS. Filing the forms incorrectly can lead to penalties. It is important to note that for 2024/2025 if you are filing ten or more forms, they must be electronically filed. Most ALEs will be required to file electronically. Copies must also be provided to employees.
2. Notice of Coverage: This document informs employees about available insurance options through the Health Insurance Marketplace. While providing this notice is required under the ACA, there is currently no penalty for not doing so.
3. Summary of Benefits and Coverage (SBC): An SBC is a document outlining the details of a health plan, including covered services, costs, limitations, and examples of coverage. Employers must provide this to employees at specific times, such as during enrollment or when coverage changes, to facilitate informed decision-making and easy comparison between plans. ACA fines for not sending SBC documents in 2024 are up to $1,406 per failure.
Strategies for ACA Compliance in 2025
The following strategies can help you stay compliant with ACA updates for 2025.
Understand your ACA compliance needs
Some businesses may not understand if they need to be ACA-compliant. Calculating full-time equivalents (FTEs) is an essential step in assessing whether your business is considered an ALE under the ACA. We talked about it above, but the process can be complex, so it’s worth breaking it down again:
How are Full-Time Equivalents (FTEs) Calculated?
To calculate FTEs, total the hours worked by part-time employees in a given week and divide this number by 30 (representing a standard workweek). Then, add the result to your actual count of full-time employees. If the final number exceeds 50, your business qualifies as an ALE and must comply with ACA regulations.
Example Calculation: If an employee works 20 hours per week, they would count as 0.6 FTE (20 hours / 30-hour workweek). Combining these part-time calculations with your full-time staff count gives you the total FTE figure.
The benefits of offering an affordable MEC plan
Offering an affordable MEC plan provides multiple advantages for businesses aiming to stay ACA-compliant. Here’s why investing in affordable MEC plans can benefit your company:
Avoid Penalties
MEC plans cover basic health services, including preventive care and essential screenings, which help employers avoid Part A penalties (often referred to as the sledgehammer penalty). While MEC plans may not fulfill the ACA’s minimum value requirements (covering at least 60% of total medical expenses), they ensure basic compliance and avoid the most substantial fines.
Recruitment and Retention Advantages
In a competitive job market, health benefits can be a deciding factor for potential employees. Surveys have shown that most workers prefer employer-sponsored health insurance. Providing an affordable MEC plan helps your company stand out as a desirable workplace, aiding hiring and retention efforts.
How to stay informed on ACA compliance
Staying updated on ACA regulations is crucial for maintaining compliance. Here are some ways to keep track of changes and requirements:
- Rely on Official Sources: Regularly check resources like the IRS and the U.S. Department of Labor websites for the latest ACA updates for 2025 and beyond.
- Consult Industry Experts: Partnering with ACA compliance specialists or companies like Vitable Health can provide you with timely information, actionable insights, and ACA compliance solutions.
- Subscribe to News Alerts: Sign up for newsletters or alerts from reliable industry publications to stay ahead of policy shifts.
ACA Reporting Deadlines: Important Dates for 2025
Below are the ACA reporting deadlines for the 2024 coverage year:
- February 28, 2025: Last date to file paper Forms 1094-C and 1095-C with the IRS (only applicable for those filing fewer than ten forms).
- March 3, 2025: Deadline to send Form 1095-C to employees.
- March 31, 2025: Electronic filing deadline for Forms 1094-C and 1095-C (mandatory for those filing 11 or more forms).
Forms 1094-B and 1095-B: Non-ALEs sponsoring a self-insured plan, including level-funded plans, must adhere to the same deadlines stated above.
Meeting these dates will help your business avoid ACA fines for late filing or failure to file.
Affordable Solutions for ACA Compliance in 2025
Navigating ACA compliance can be challenging for small and mid-sized businesses, but with the right strategies and support, it doesn’t have to be overwhelming or costly. Staying informed, calculating your FTEs, and providing affordable coverage options to employees are essential steps to protect your business from potential ACA fines and penalties.
As you prepare for the ACA updates for 2025, consider affordable ACA compliance solutions that benefit both your business and your employees. Schedule a free ACA consultation with Vitable to explore how our innovative health plans can meet your ACA compliance needs and elevate your company’s healthcare offerings.
