The Affordable Care Act (ACA), also known as the Patient Protection and Affordable Care Act, is a comprehensive piece of legislation that represents a significant milestone in United States healthcare reform. Since its legislative passing in March 2010, the ACA has helped reduce the number of uninsured people in the US by more than 20 million.
The ACA also defined key mandates and responsibilities for businesses, including significant penalties for failure to comply with ACA requirements. Although navigating these requirements can seem like a daunting task, it’s important to remember that the ACA ultimately serves to help employers provide better care for all their employees and support a healthier workforce.
Based on research, health insurance is a top priority for job seekers and employees. In fact, a poll for the Protecting Americans Coverage Together (PACT) campaign found that as high as 96% of respondents believe it is important for a job to offer health insurance, with the majority reporting they would not accept a job that does not provide health benefits. Therefore, understanding your responsibilities under the ACA is crucial for businesses to attract and retain top talent by offering competitive health benefits that meet ACA compliance requirements.
This article will break down the top three goals that the Affordable Care Act (ACA) set to accomplish and what they mean for employers. Read on to learn more!
Goal 1: Expand Access to HealthCare
The first and most fundamental goal of the ACA is to make health insurance more accessible to Americans. The ACA was designed to directly address long-standing barriers within the U.S. healthcare system that have made it challenging for many Americans to secure adequate health coverage on their own or through their employer.
What does this mean for employers?
For employers, this translated into specific requirements, especially for Applicable Large Employers (ALEs). A company is considered an ALE when they have 50 or more full-time or full-time equivalent (FTE) employees.
ACA ALE requirements
Under the Employer Shared Responsibility Provisions (Employer Mandate), ALEs must satisfy two main requirements:
Part A – Offering Minimum Essential Coverage (MEC):
- ALEs must offer minimum essential coverage (MEC) to at least 95% of full-time workers or full-time equivalents, as well as their dependents.
- Failing to meet this requirement can result in a penalty fine of $2,900 per employee (adjusted annually), even if just one employee obtains subsidized coverage through the exchange.
Part B – Offering Affordable, Minimum Value Coverage:
- Must cover at least 60% of the anticipated total expenses for an average population.
- Must cover inpatient and outpatient care, emergency services, maternity care, and other specific conditions.
- Must meet the affordability threshold set by the U.S. Internal Revenue Service (IRS) each year, which is 9.02% of an employee's household income for 2025.
By encouraging businesses to offer affordable, quality health insurance, the ACA has helped millions of employees and their families gain access to preventive care, chronic disease management, and necessary medical services. In turn, this expansion of coverage supports healthier workplaces, reduces absenteeism, and improves overall workforce productivity. With the help of the ACA, a 2024 report from the U.S. Centers for Disease Control and Prevention (CDC) found that the overall number of Americans without health insurance has dropped by 8.2 million from 2019 to 2023.
Goal 2: Improve the Quality of Care
The ACA didn’t just aim to make healthcare more accessible; it also sought to improve the quality of care Americans receive. By shifting the focus from reactive treatments to preventive and coordinated care, the ACA introduced standards designed to drive better health outcomes, reduce medical errors, and improve overall patient satisfaction.
What does this mean for employers?
For employers offering health benefits, the emphasis on quality care means selecting plans that go beyond basic coverage. The ACA requires that all compliant health plans include Essential Health Benefits (EHBs) that support comprehensive care and long-term wellness.
Essential health benefits and quality standards
All health plans must meet these five key quality requirements, among others, to ensure ACA compliance.
- Guaranteed Coverage for Preexisting Conditions:
Under the ACA, it is illegal for insurance providers to deny coverage or charge more based on preexisting conditions. This applies to individual, small-group, and large-group health plans. Health status, medical history, and gender cannot be used to determine eligibility or pricing.
- No Lifetime Coverage Limits:
The ACA prohibits health plans from placing lifetime or annual dollar limits on coverage for Essential Health Benefits (EHBs). This rule applies to all ACA-compliant plans, including those in the individual, small-group, and large-group markets.
- Essential Health Benefits:
The ACA requires individual and small-group market plans to cover a standard package of 10 essential health benefits, which include outpatient care, emergency services, mental health treatment, maternity care, and preventive services. Large-group and self-insured plans are not required to cover all 10 EHBs, but if they do, they cannot impose lifetime or annual limits on those services.
- Free Preventive Care Screenings:
Most ACA-compliant plans must cover a range of preventive services with no cost-sharing, such as vaccinations, screenings, annual wellness visits, and contraceptive methods. These services must be provided without copayments, deductibles, or coinsurance when delivered by in-network providers.
- Coverage for Children Up to Age 26:
The ACA mandates that health plans offering dependent coverage must allow young adults to remain on their parents’ plan until they turn 26. This applies regardless of marital status, student status, financial independence, or residence.
Providing access to high-quality, preventive care can result in a healthier and more productive workforce. Preventive screenings, immunizations, and wellness programs can catch illnesses early, lower long-term healthcare costs, and reduce absenteeism. In addition, the ACA encourages care coordination through value-based care models, which reward providers for improving outcomes rather than increasing service volume. This benefits employers by helping control costs while ensuring employees receive better, more effective care.
Goal 3: Reduce Healthcare Costs
The third crucial goal of the ACA is to reduce the overall cost burden of healthcare for individuals, employers, and the system as a whole. Rising healthcare expenses have long been a pain point for employers offering benefits, and the ACA introduced several mechanisms aimed at controlling these costs while encouraging more efficient care delivery.
What does this mean for employers?
As discussed under Goal 1, under Part B of the Employer Mandate, employers are responsible for offering coverage that is both affordable and meets minimum value standards.
The ACA defines “affordable” based on a threshold set annually by the IRS. For 2025, the affordability threshold is 9.02% of an employee’s household income for self-only coverage—an increase from 8.39% in 2024.
If an employer offers health benefits that do not meet the minimum value standard, or if the affordability threshold is exceeded, they may face a penalty of $4,350 per full-time worker.
However, this penalty only applies to employees who qualify for a Premium Tax Credit and obtain ACA health coverage through the Marketplace.
How does the ACA help employers manage or reduce healthcare costs?
While the ACA imposes certain coverage requirements, it also introduced mechanisms that can help employers control or offset rising healthcare expenses:
Medical Loss Ratio (MLR) Rule
The ACA requires insurance providers to spend at least 80% (small group) or 85% (large group) of premium dollars on actual medical care and quality improvement, not on administrative costs or profits. If an insurance provider fails to meet this requirement, they must issue rebates to the policyholder, often the employer. These rebates can help offset annual premium costs or be passed on to employees.
Tax Credits for Small Employers
Businesses with fewer than 25 full-time equivalent (FTE) employees may qualify for a federal tax credit of up to 50% of premiums paid if:
- They offer coverage through the Small Business Health Options Program (SHOP)
- Pay at least 50% of the premiums cost for employee-only health coverage.
- Pay average annual wages below a specified threshold, which is adjusted annually for inflation.
This can significantly lower the cost of offering health insurance for smaller businesses. Learn more or check eligibility on the IRS website.
How ACA Compliance and Better Health Benefits Strengthen Your Business
While meeting ACA requirements can feel overwhelming, ACA compliance isn’t just about avoiding penalties. Providing high-quality, affordable health benefits can lead to measurable business gains. From improving employee retention to reducing absenteeism, investing in better healthcare coverage gives your company a competitive advantage.
Improved employee retention
Losing a quality employee can carry hefty financial and operational costs for companies. However, according to data from The Predictive Index, employers offering competitive health benefits see 27% lower turnover rates. Simply put, investing in employee health strengthens job loyalty, helping you retain high-performing talent and reduce the costly churn of hiring and training replacements.
Stronger workforce recruitment
In today’s competitive hiring market, health benefits are often a deciding factor for job seekers. A recent study from the Society for Human Resource Management found that 90% of people surveyed believed a health plan is a “very important” or “extremely important” employee benefit. Employers that can offer a comprehensive health benefits package will have a clear competitive advantage in the current job marketplace. These jobs are not only filled faster, but the position is more likely to secure top-tier candidates.
Increased employee work productivity
Access to comprehensive healthcare, particularly preventive and primary care, helps employees stay healthy and focused. According to data from Gallup, businesses that offer health benefits report a 17% increase in productivity. Another study by SHRM found that employees with health benefits take 3.9 fewer sick days annually.
Reduced absenteeism from work
The Centers for Disease Control and Prevention (CDC) estimates that absenteeism at work can cost anywhere from US$2 billion to more than US$81 billion a year. This staggering statistic alone underscores the importance of employers offering comprehensive health benefits, as a healthy workforce leads to fewer missed workdays. Most notably, a study published in Labour Economics found that insured employees missed 54% fewer workdays than uninsured employees.
ACA Compliance Doesn’t Have to Be Complicated—Vitable Makes It Easy
The Affordable Care Act (ACA) has significantly reshaped how Americans access healthcare, but for many employers, it has also introduced complexity and uncertainty. From understanding whether your business qualifies as an Applicable Large Employer (ALE) to determining which ACA-compliant plans fit your budget and workforce, navigating healthcare benefits can feel overwhelming. Having a trusted partner like Vitable can help.
Vitable is a health benefits platform making healthcare better for everyday workers. To do this, we empower employers to offer meaningful, ACA-compliant healthcare coverage, at a fraction of the cost of traditional group plans. Whether you're looking to meet Minimum Essential Coverage (MEC) requirements, go beyond preventive-only coverage, or build a comprehensive benefits strategy, Vitable offers flexible solutions for businesses of all sizes.
All of our plans are simple, affordable, and fully ACA-compliant, while also delivering real value to your team. At the core of every plan is Vitable’s enhanced Primary Care Membership, which provides convenient, everyday care that helps employees stay healthy and productive—all at no out-of-pocket cost to them.
Each Primary Care Membership includes:
- Unlimited primary care visits
- Urgent care visits
- Access to 1,000+ free prescriptions
- Labs and diagnostics
- Mental health support
- Same-day virtual appointments
- No copays, coinsurance, or deductibles
- Free dependent coverage
- And more!
Partnering with a trusted health benefits provider like Vitable means you don’t have to navigate ACA compliance alone. We’re here to help you build a benefits strategy that works for your business—and your people.
Ready for Better Benefits? Explore Vitable’s ACA-Compliant Health Plans
Let’s build a health benefits strategy your employees will actually use and your finance and operations teams will appreciate. From compliance guidance to cost-benefit modeling, we’ll walk you through your options and tailor a health plan that fits your workforce, your goals, and your budget.
Get Started with Vitable today.
