Who must offer coverage
- Count your employees for the prior calendar year. Add full-time employees (30+ hours a week) and full-time equivalents from part-time hours. If the monthly average was 50 or more, you are an ALE for the current year.
- Combine related companies. Businesses under common or related ownership are counted together, so a business under 50 on its own can still be an ALE.
- Offer coverage to at least 95% of full-time employees and their dependent children under 26. Spouses don't have to be offered coverage under this rule.
- Make it affordable and minimum value for full-time employees, or expect a penalty if any of them get a Marketplace premium tax credit.
Counting full-time equivalents, seasonal workers and related companies has detailed rules. Check your count with a benefits attorney or tax advisor.
The 2026 numbers
| Rule | 2026 figure | What it means |
|---|---|---|
| Affordability | 9.96% of household income | Employee cost for the cheapest self-only option offered (Rev. Proc. 2025-25) |
| Minimum value | 60% | Plan pays at least 60% of total allowed costs |
| Penalty A: no offer to 95% | $3,340 per full-time employee per year | Applies to all full-time employees minus the first 30, if at least one gets a premium tax credit |
| Penalty B: offer is unaffordable or not minimum value | $5,010 per year | For each full-time employee who gets a premium tax credit, capped at what Penalty A would be |
Employers rarely know household income, so the IRS lets them test affordability with one of three safe harbors: the employee's Form W-2 wages, rate of pay, or the federal poverty line.
Options for employers under 50
If you are not an ALE, the IRS says you owe no employer shared responsibility payment, even if employees get premium tax credits. Many small employers still offer something to hire and keep people:
- A group health plan, through a broker or the SHOP Marketplace. Employers with fewer than 25 FTEs may qualify for the Small Business Health Care Tax Credit.
- A QSEHRA, which reimburses employees' own coverage and medical costs tax-free up to $6,450 for self-only and $13,100 for family coverage in 2026.
- An individual coverage HRA (HealthCare.gov now calls it a CHOICE Arrangement), which reimburses premiums and medical costs tax-free up to an amount the employer sets.
- A taxable health stipend, paid as wages and not tied to buying insurance.
Don't reimburse employees' individual premiums tax-free outside a QSEHRA or ICHRA. The IRS says such employer payment plans fail ACA market reforms and can trigger an excise tax of $100 a day per affected employee. See small business health insurance.
State rules and COBRA
- Hawaii: the Prepaid Health Care Act requires employers to cover employees who work at least 20 hours a week and meet a monthly earnings test, after four consecutive weeks. The employer pays at least half the premium, and the employee's share can't exceed the lesser of 50% of the premium or 1.5% of monthly gross earnings.
- COBRA: if you offer a group plan and had 20 or more employees in the prior year, federal COBRA generally requires you to offer continuation coverage when coverage would end. See COBRA insurance.
Where Gabriel fits
Employers with 25 or more employees can add Gabriel for Teams, a care membership, alongside a health plan. It is not group health insurance and not an HRA or ICHRA, it doesn't replace a health plan, and it never satisfies the ACA employer mandate.
Common questions
Do small businesses have to offer health insurance?
Not under federal law if they had fewer than 50 full-time employees, including equivalents, in the prior year. Hawaii is the main exception, with its own employer requirement.
Do employers have to offer health insurance to part-time employees?
The federal mandate covers full-time employees, meaning 30 or more hours a week on average. Part-time hours still count toward whether you reach 50 full-time equivalents. See health insurance for part-time employees.
What is the affordability percentage for 2026?
9.96% of household income for plan years beginning in 2026, set by IRS Rev. Proc. 2025-25. Most employers test it with a W-2, rate of pay or federal poverty line safe harbor.
What is the ACA employer penalty for 2026?
$3,340 per full-time employee (minus the first 30) for not offering coverage to 95% of full-time staff, or $5,010 per employee who gets a premium tax credit when the offer is unaffordable or not minimum value.
Do employers have to cover spouses?
No. The federal rule requires an offer to full-time employees and their dependent children, not spouses. Plans may choose to cover spouses.
Sources
- Employer shared responsibility provisions IRS
- Minimum value and affordability IRS
- Rev. Proc. 2025-25 (2026 required contribution percentage) IRS
- Internal Revenue Bulletin 2025-33 (Rev. Proc. 2025-26, 2026 penalty amounts) IRS
- About Prepaid Health Care Hawaii Department of Labor and Industrial Relations
- COBRA continuation coverage U.S. Department of Labor
This guide is general information, not medical advice. It does not replace a visit with a licensed clinician. Gabriel membership is not health insurance.