Are Employers Required To Offer Health Insurance To Employees? | The Lines That Matter

Most employers aren’t legally required to offer a plan, yet companies with 50+ full-time equivalent staff can face ACA penalties if they don’t.

If you’re hiring, changing schedules, or shopping for a job, this question pops up fast. The answer isn’t a simple yes or no because federal rules hinge on employer size and worker hours. Once you know where your company sits, the rest is paperwork and pricing math.

This article explains the federal ACA rule set, how the 50 full-time equivalent (FTE) test works, what “offer” means, and what employees can do when there’s no plan on the table.

What Federal Law Requires From Employers

The Affordable Care Act uses the term “applicable large employer” (ALE). ALEs can owe an employer shared responsibility payment when they don’t offer qualifying health insurance to enough full-time staff.

The IRS lays out the mandate structure, penalty triggers, and reporting expectations under the employer shared responsibility provisions. That page is the cleanest starting point when you want the rulebook, not folklore.

Who counts as an applicable large employer

An employer is an ALE for a calendar year when it averaged at least 50 full-time employees, including full-time equivalent employees, during the prior calendar year. The IRS also explains the counting method on its page for determining applicable large employer status.

• Full-time for ACA employer rules is generally 30 hours per week (or 130 hours in a month), not 40.
• Full-time equivalent (FTE) is built by pooling part-time hours into “equivalent” full-time slots for the size test.

What “required to offer” means

For an ALE, the mandate isn’t “buy a plan or else.” It’s “make an offer of minimum required health insurance to enough full-time staff and their eligible children.” If an ALE skips the offer or the offer fails affordability or minimum value rules, penalties can apply when at least one full-time employee gets a premium tax credit through the Marketplace.

That’s why compliance is record-driven. You need clean monthly answers to four questions: who was full-time, who got an offer, what the employee contribution was for self-only coverage, and whether the plan met the minimum value test.

Are Employers Required To Offer Health Insurance To Employees? For Smaller Employers

Employers under the 50 FTE threshold aren’t subject to the ACA employer mandate penalty at the federal level. Many people stop there. Small employers can still be bound by rules tied to any plan they do offer, plus state requirements that vary by location.

HealthCare.gov outlines small-business obligations and options on how the ACA affects businesses, including the Summary of Benefits (SBC) disclosure.

Why small teams often offer a plan anyway

Plenty of small employers offer health insurance to stay competitive in hiring. A group plan can lower the employee’s share through an employer contribution and may allow pre-tax payroll deductions for premiums when set up through payroll.

Small employers also use different benefit designs: one group plan, a plan menu, or a defined contribution model. The best fit depends on budget, workforce mix, and how steady your hours and headcount stay across the year.

How To Know If You Cross The 50 FTE Threshold

If your business sits near 50, run the count using payroll hours, month by month. A quick headcount can miss part-time hours that add up.

Step 1: Identify full-time employees each month

For each month in the prior year, count employees who averaged at least 30 hours per week (or 130 hours in that month).

Step 2: Convert part-time hours into FTEs

Add hours for employees who were not full-time, cap each person’s hours at 120 for this calculation, then divide the total by 120. That result is your FTE figure for the month.

Step 3: Average the monthly totals across the year

Add full-time employees and FTEs for each month, then average across 12 months. If the average is 50 or more, you’re an ALE for the current year.

Two traps that catch growing companies

• Seasonal surges that push part-time hours high enough to raise your FTE average.
• Related entities with common owners that may be treated as one employer group for counting.

Employer Size And Duties At A Glance

This table maps common headcount situations to the federal mandate question, then adds the practical action to take.

Employer profile	Federal mandate status	What to do next
1–9 employees	No ACA employer mandate penalty	Pick a benefit approach that fits budget and hiring goals
10–24 employees	No mandate penalty	Compare group plans and defined contribution setups
25–49 FTE average	No mandate penalty at the federal level	Track hours monthly so you don’t drift past 50 unnoticed
50–59 FTE average	ALE; mandate and reporting rules apply	Set a measurement method and document offers by month
60–99 FTE average	ALE; more employees affected if offers are missed	Audit affordability before renewal and keep clean eligibility files
100+ FTE average	ALE; mandate applies at scale	Standardize onboarding, enrollment, and offer proof storage
Many part-time roles	FTE math can push you into ALE status	Run the FTE calculation monthly, not once a year
Multiple related companies	May be treated as one employer for counting	Run counts at the ownership-group level

What Makes An ACA Offer Compliant

An offer can exist on paper and still trigger penalties if it fails affordability or minimum value rules. Here’s what those terms mean without legalese.

Affordability

Affordability is measured against the employee’s required premium contribution for self-only coverage. The employer usually doesn’t know household income, so many employers use an IRS safe harbor (W-2 wages, rate of pay, or the federal poverty line) to test the employee contribution.

Minimum value

Minimum value is a plan design test. The plan should pay at least 60% of expected allowed medical costs for standard services. A plan can pass affordability and still fail minimum value if the cost-sharing pushes too much cost onto employees.

Dependent offers

For the mandate offer rate, “dependents” generally means an employee’s children, not a spouse. An ALE must offer enrollment to eligible children to avoid certain penalties, even if the employer doesn’t pay the full dependent premium.

What Happens When An Applicable Large Employer Doesn’t Offer A Plan

Penalty risk rises when full-time staff members are missed, offers aren’t documented, or the employee contribution is set without an affordability test. If a full-time employee receives a premium tax credit through the Marketplace, that can trigger IRS review tied to the employer’s reporting and records.

Patterns that create penalty exposure

• Full-time status isn’t tracked consistently across months.
• New hires are left out during waiting periods that don’t match plan rules.
• Offer letters are verbal, scattered, or stored inconsistently.
• Dependent eligibility is handled case by case with no written rule.

Options For Employees When There’s No Employer Plan

If your employer isn’t an ALE, they may not have to offer a plan under the federal mandate. You still have paths to health insurance.

Marketplace enrollment and premium tax credits

Loss of job-based health insurance or a change in work hours can open a special enrollment period. If you don’t have an offer of affordable, minimum value employer health insurance, you may qualify for premium tax credits through the Marketplace, based on household income and other factors.

Plan documents when a plan exists

If your employer offers a plan, you have rights to clear plan information. The U.S. Department of Labor collects ACA materials and worker protections on its Affordable Care Act employer and adviser page.

Check the 30-hour line

If your schedule regularly sits above 30 hours per week, ask HR how they measure hours for ACA purposes and whether you’re listed as full-time in their records. Misclassification is common when schedules shift slowly over a few months.

Checks To Run Before Renewal And Reporting

These checks help employers avoid surprise penalties and help employees know what to ask.

Check	What to verify	When to run it
ALE status	Prior-year average hits 50+ FTE	Early Q1
Full-time roster	30+ hours/week or 130+ hours/month list by month	Monthly
Offer proof	Offer dates, waivers, and eligibility notes are stored	At hire + annual enrollment
Affordability test	Self-only contribution meets the safe harbor you picked	Before the plan year starts
Minimum value	Carrier or plan documentation confirms the plan meets the test	Before renewal is signed
Dependent offer	Eligible children can enroll under written rules	At enrollment setup
Reporting data match	Payroll, HRIS, and carrier enrollment records agree	Before ACA forms are filed

Plain Checklist You Can Save

This list is short on purpose. It’s meant to fit on one screen and still keep you out of trouble.

Employer checklist

• Confirm ALE status using the prior-year monthly average method.
• Use one written method to classify full-time staff and apply it the same way all year.
• Store offer letters, waivers, and dependent eligibility records in one place.
• Test self-only premium contributions with an IRS safe harbor before renewal.
• Confirm the plan meets the minimum value test before signing renewal terms.
• Reconcile payroll, HR, and carrier files before annual reporting.

Employee checklist

• Track your average weekly hours and monthly totals.
• Ask whether you’re listed as full-time for ACA purposes.
• If there’s no offer, check Marketplace enrollment windows and subsidy rules.
• If there is a plan, request the Summary of Benefits (SBC) and the full plan document.