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ACA Information for Small Groups


Health Care Reforms Affordable Care Act

 Information for Employers and Employees

So how does ACA reform affect Small Business Group Health Plans, its employees and Individuals? 

Here is an Overview of ACA Reform on all Small Business Group Health Plans. 



Since October 1st 2013 an additional New Marketplace was opened to accept Individuals and Small Business Groups.  See the comparison below for the difference between the Traditional Open Market to the New Marketplace called Covered California.


What are the differences?



Off Exchange

?         Current way to purchase your 

Individual and Small Group Health Plans

?         Open Market Health Plans are different from CoveredCA

?         Open Market Plans can be purchased from JIA Insurance  




On Exchange

?           Additional way to purchase your 

Individual and Small Group Health Plans

?         CoveredCA Health Plans are different from Open Market

?         CoveredCalifornia can be purchased from JIA Insurance Services

The differences from the Covered California Market?

?       Additional Health Plans will be available from the Health Insurance Carriers not offered in Covered California

?       Individual and Employer Tax Credits will not apply to the Open Market Plans

The differences from the Open Market?

?       Additional Health Plans are not available and is only offered in the Open Market.

?       Individual and Employer Tax Credits will only be applied to Covered California Market Plans.*


 California vs ACA Small and Large Businesses Group Definitions

·       California Small Business Groups is the employment of less than 100 Full Time Employees. 

·       California Large Business Groups is the employment of more than 100 Full Time Employees.  


v    ACA Large Business Groups or ALE Applicable Large Employer is defined as the employment of more than 50 Full Time Employees including FTE Full Time Equivalent Employees.  And the aggregate of other businesses owned by the Employer. 


Definitions and Formulation of Employment to determine a ALE Applicable Large Employer

o      Full Time Employee definition is 30 or more hours per week.  

o      Full Time Equivalent (FTE) Employees definition are calculated by taking all the hours worked by Part Time Employees in a week divided by 30 hours. 

o      Seasonal and Temporary employment are not eligible

 If the combined total is 50 or more including the aggregate of businesses owned by the Employer, then the group is defined as an ALE Applicable Large Employer in California.   ALE is subject to the Employer Shared Responsibility Provisions of the ACA also known as the ACA Employer Mandate. Those who do not comply with the ACA Employer Mandate will pay a Penalty Fee.  If you are considered an ALE please contact my office if you want further information or have questions. 

 For CA Small Business Groups under ACA ALE Formulation of less than 50 employees are not subject to the ACA Employer Mandate.  Here are some considerations if you offer a Non-ALE Small Business Group Health Plan.


Small Business Tax Credits

Some small businesses may qualify for a small business advance Employer Tax Credit Subsidy through CoveredCA.

As a small-business owner, you may qualify for a federal tax credit to help offset the cost of providing health insurance to your employees by purchasing coverage with Covered California for Small Business. To qualify for a tax credit, employers must contribute at least 50 percent of their employee premium costs.

Currently, federal tax credits are only available to small businesses that purchase health insurance through Covered California for Small Business. The maximum available tax credit is 50 percent of insurance premium expenses and is available for a total of two consecutive years.


Go to: https://coveredcaagent.pinnacletpa.com/smallbusiness_tcc/

Your tax credit will depend on a number of factors, including the number of full-time-equivalent employees you have and the amount you contribute toward premiums. Generally, small businesses that have fewer than 25 full-time-equivalent employees and pay an average annual salary of less than $54,000 a year will be eligible for the tax credit. Employers with fewer than 10 full-time-equivalent employees with wages averaging less than $26,000 per year may be eligible for the maximum tax credit amount.

Tax Year

Maximum Tax Credit as a Percentage of Premium Expenses

Maximum Tax Credit for
Tax-Exempt Organizations as a Percentage of Premium Expenses

Tax credit available for two consecutive tax years.



The maximum tax credit available is 50 percent of premium expenses, and the maximum credit for tax-exempt employers is 35 percent. Small businesses must purchase health insurance through Covered California for Small Business to be eligible for the tax credits offered.

The amount of the tax credit cannot exceed the total income and Medicare tax the employer is required to withhold from employees’ annual wages, plus the employer’s share of the Medicare tax.

Example of Small Business Receiving Tax Credit for Health Insurance: Beauty Shop with 10 Full-Time-Equivalent Employees


10 full-time-equivalent employees


$260,000 total, or an average of $26,000 per employee

Employee Health Insurance Cost


Tax Credit (Year 1)

$35,000 (50%)

Tax Credit (Year 2)

$35,000 (50%)

Tax Credit (Year 3)

Not eligible for tax credit


California Small Businesses Group (non-ALE) under 50 employees Information

 This section will provide information for CA small business employers and its employees that are not an ALE.   Non- ALE Employers and its Employees may qualify and be eligible for Tax Credit Subsidies in the New Marketplace with CoveredCA.  If the non-ALE Employers do not qualify for the Employer Tax Credit Subsidy, here are some for both employers and employees.


Small Business Group Plans must meet 2 Standards:

?       Affordability Standard: Employee contribution cost for the Employers lowest cost group health plan (and not any other members of your family) is less than 9.78% of Your Household Income for the year. If the contribution is more than 9.78% of Your Household Income the Standard is NOT met.

 ?       Minimum Value Standard: Employers Health Coverage Minimum Value is 60% coverage or higher.  If the plans share of the total allowed costs of benefits provided is less than 60 percent of the Actuarial Value then the Standard is NOT met.  All Group Plans now meet this standard.

 If the Affordability Standard is not met, then the Employee may want to consider declining the Group’s Contribution Plan Offer for enrollment after investigating if they are eligible for Tax Credit and Cost Sharing Subsidies with an INDIVIDUAL PLAN though the New Marketplace called Covered California.   


Not meeting the Affordability Standard and qualifying for Individual Plan Subsidies

All Group Plans now meet the Minimum Value Standard, but what if an Employees Affordability Standard is not met.  The employee and their family household may be eligible for a Tax Credit and Cost Sharing Subsidies through the New Marketplace at Covered California for an INDIVIDUAL PLAN.   

 So how does an employee know weather they qualify for Individual Subsidies?

They must meet 2 requirements:

 §       Affordability Standard is NOT met for the Employee and their Spouse if covered by a separate Group Plan.

§       Employees Household Total Income (including Spouse) is UNDER 600% of the Federal Poverty Level.

 Please Note: If the Employees 2020 Household Total Income is ABOVE 600%, then there is NO tax credit subsidy even if the Affordability Standard is not met. 

Affordability Standard Formulation: How to determine the Employee’s affordability in 2020

Formula to determine 9.78% Affordability


Employee contributes $_________/month


Divide this amount  -:- by .0978

-:- .0978  affordability factor

The result will give you the monthly income threshold =

= $1,022.49 monthly income threshold

*Income below the threshold is deemed unaffordable

*Income above this Amount is deemed affordable

*If the Employee’s Contribution/month for the Lowest Cost Group Plan exceeds 9.78% of their Individual Income then they may qualify for 2019 Federal ACA and the New 2020 CoveredCA Additional Tax Credits. 

1.  How many eligible employees currently do not meet the Affordability Standard? 

An easy way to check is to tabulate using the following formula or use W2 Income for the monthly average.

 2.  How many eligible employees estimated Household Total Income will be BELOW 600% of the Federal Poverty Level in 2020?  


See the 2020 Household Income Guidelines with INDIVIDUAL PLANS

for Medi-CAL, Tax Credit and Cost Sharing Subsidies

For more information about Individual and Employer Tax Credits go to:

*            ACA Affordable Care Acts Individual Tax Credits Information

*            Overview of Health Care Reform's ACA Affordable Care Act


Contact me if you have questions about any affordable Individual and Group Plans or to obtain a Quick Quote from my Website here at www.jiainsuranceservices.com


James I. Aoki

 Insurance Brokerage Services

Independent Insurance Broker 39 years

Registered Representative 33 years with Fortune Financial Services

   805 962-2277 Office    805 962-9928 Fax

Email:  jim@jiainsuranceservices.com