Which health plans are ACA-compliant?

As an employer or HR professional, you know that navigating complex Affordable Care Act (ACA) requirements can be challenging. From the employer mandate to market reform rules, you need to understand which health plans are ACA-compliant. Selecting the right health plan helps larger businesses avoid costly tax penalties and helps you provide your employees with essential coverage.

In this blog post, you’ll learn:

• How to determine if your organization is an applicable large employer (ALE) and what ACA requirements apply to you.
• What makes a health insurance plan ACA-compliant.
• The different types of ACA-compliant health benefits employers can offer.

Which organizations must comply with the ACA?

Under the ACA’s employer mandate, public and private companies with at least 50 full-time equivalent employees (FTEs) must provide their workers with health insurance coverage. Organizations of this size are known as applicable large employers (ALEs).

Here’s a quick breakdown of the employer mandate:

1. ALEs must offer affordable health insurance that provides minimum essential coverage (MEC) to at least 95% of their full-time employees and their dependents.
   1. In 2025, an employer-sponsored health plan is affordable as long as employees pay no more than 9.02% of their household income toward health coverage. Using the federal poverty level safe harbor, a self-only health plan is affordable if employees don’t pay more than $113.20 per month for their portion of the premiums.
2. The health insurance plan must also meet minimum value standards. The ACA requires plans to cover at least 60% of the average medical expenses for a standard population.

ALEs must meet both the MEC and minimum value requirements. If they don’t and at least one employee buys health coverage with a subsidy through a public exchange, the IRS may impose one of two tax penalties. These are known as employer shared responsibility payments.

You’re not required to offer your employees health coverage if your company isn’t an ALE. Nor will you be subject to a penalty for failing to do so. But, there are many advantages to adding a health benefit to your compensation package, such as attracting quality job candidates and giving your business an edge over your competitors.

What makes a health plan ACA-compliant?

ACA-compliant health insurance plans must meet specific standards to ensure they offer individuals minimum but comprehensive coverage. But, the requirements vary depending on whether the plan is available on the individual, small group, or large group health insurance markets.

Individual markets

As the name suggests, the individual market sells individual health insurance. Consumers can buy these plans directly as they’re not tied to employment. They also aren’t a federal government program like Medicare. Individual health insurance plans include self-only and family coverage.

All individual health plans sold on the Marketplaces must meet the following ACA requirements:

• Policies must cover the 10 essential health benefits. These services include hospitalization, prescription drug coverage, emergency services, and pediatric healthcare.
• Insurers must classify their plans using the metallic tiers of coverage, such as bronze, silver, gold, and platinum. Bronze plans tend to have lower premiums and actuarial values, while gold and platinum plans have higher premiums and actuarial values.
• Plans must follow the federally set limits on out-of-pocket medical costs for covered in-network services. This includes annual out-of-pocket maximum limits and deductibles for high deductible health plans (HDHPs).
• Health insurers can’t charge higher premiums or limit coverage for enrollees if they have a pre-existing condition.
• Insurers can only vary premium rates based on age, tobacco use, family size, plan type, and location. Additionally, insurance carriers can’t charge older individuals more than three times the premium rate of younger individuals.
• Policies must be “guaranteed-issued” during the Open Enrollment Period or if the consumer is in a special enrollment period.
• Health plans can’t have annual or lifetime dollar amounts on essential benefits.
• Children listed as dependents on a parent’s plan can remain on the policy until age 26.
• Insurers must spend at least 80% of their premium revenue on healthcare and quality improvement and no more than 20% on administration expenses. If they don’t meet this medical loss ratio (MLR), they must issue enrollees a rebate.

Individuals can buy a self-only or family plan on a public or private health exchange. Public exchanges, like the federal Health Insurance Marketplace and state-based marketplaces, only offer ACA-compliant health plans. But, private exchanges can offer ACA-compliant and non-compliant plans.

Small group markets

The small group health insurance market is only available to small employers. In most states, a small group is any organization that employs between two and 50 workers. However, some states classify businesses with between two and 100 employees as small groups.

Like large group health insurance, employers can offer small group coverage at a reduced rate to their employees, their spouses, and their dependents.

All small group plans must meet the following ACA requirements:

• Plans must offer coverage for the 10 essential health benefits.
• Health insurers must classify their plans by metal levels.
• Policies can’t have lifetime or annual limits on any essential health benefits.
• Health insurance companies can’t charge higher premiums or offer limits on coverage based on pre-existing conditions.
• Premiums can only vary based on age, tobacco use, family size, and location. Insurers can’t charge older adults more than three times the premium rate of younger individuals.
  • Additionally, insurance carriers must determine premiums using a single risk pool for all enrollees in their small group plan within a state. They can’t consider a group's health history.
• Plans must set limits on out-of-pocket costs for covered in-network medical services.
• Insurers must meet an MLR of at least 80% for medical care and quality improvement and 20% for administration costs. If they don't, they must send plan members a rebate.
• Children can stay on a parent’s health insurance plan until age 26.
• Polices are guaranteed-issue for small businesses to buy any time during the year.
  • Eligible employees can join when they’re first eligible, during the plan’s Open Enrollment, or if they trigger a special enrollment period with a qualifying life event. The waiting period for an employee to enroll in coverage can’t exceed 90 days.

Only employers can buy a small group health plan, as an individual isn’t a “group.” If you meet the qualifications for small group coverage, you can buy a policy for your employees through an insurance company, agent, or broker.

If you buy your plan on the Small Business Health Options Program (SHOP) marketplace, check your eligibility for the small business health care tax credit. If you qualify, this subsidy can help you save money on your plan’s premiums.

Large group markets

The large group market sells group health plans for larger companies. In most states, employers with 51 or more workers are large groups. However, some states consider organizations with 101 employees or more a large group.

Large group health plans have fewer ACA compliance requirements. For example, they don’t have to use metallic tiers or cover all of the essential health benefits.

All large group plans must meet the following ACA requirements:

• Insurers can vary premiums based on various factors. This includes age, number of enrolled employees, location, the type of plan, family size, your company’s medical claim history, industry, and plan add-ons.
• Policies must provide minimum value and meet the annual IRS affordability standards.
• The ACA doesn’t require large group plans to cover all 10 essential health benefits. But, policies can’t have annual or lifetime dollar limits on any essential services the large group plan does cover.
• Insurers must meet an MLR of 85% for medical care and quality improvement costs and no more than 15% for administration costs. If they don’t comply, they must issue enrollees a rebate.
• Policies must cover essential preventive care without requiring cost-sharing, such as copays and coinsurance payments.
• If an individual has a pre-existing health condition, the insurer can’t charge them a higher premium or limit their coverage.
• Young adults can remain as qualified dependent on a parent’s group plan until age 26.
• Plans must set limits on out-of-pocket healthcare costs for covered in-network services.

Like small group health insurance, employers can buy a large group plan anytime during the year. Employees can join during the plan’s Open Enrollment or a special enrollment period. If there is a waiting period, it can’t be more than 90 days. Additionally, once coverage is active, the plan must cover an employee’s pre-existing conditions without a waiting period.

What health benefits can employers offer that comply with the ACA?

Suppose you’re an ALE subject to the employer mandate or want to ensure your benefits package includes an ACA-compliant plan for comprehensive coverage. In that case, there are a few benefits you can offer that may fit your needs.

Fully-insured group plans

With a fully-insured health plan, employers select a group health plan to offer their employees and eligible dependents. Then, the enrolled employees and the employer pay a set premium to the insurance company. In return, the company covers certain healthcare services and pays employees’ medical claims.

Insurers set their group plan premium rates annually using several factors. In most cases, the employer deducts the employee’s portion of the premium from their paycheck on a pre-tax basis. While the insurance company pays claims for covered services under the policy, the employee must pay for out-of-pocket medical costs, like deductibles and out-of-network care.

Fully-insured plans are the traditional health benefit option. But they come with some drawbacks. For example, they’re prone to annual rate hikes, have strict participation requirements, and can have limited plan choices. However, they offer lower financial risk and administrative duties for employers. This is because the insurer pays medical claims and deals with complex compliance regulations.

Self-insured plans

With a self-insured health plan, you create and manage your own policy. Instead of working with an insurance company and paying a monthly premium, you can craft a custom benefit that meets your employees’ diverse needs. This added flexibility can make a self-funded plan more appealing to employers than fully-insured policies.

However, this added customization comes with greater financial risk and administrative burden. With self-insured plans, you're responsible for calculating the plan's fixed and variable costs. This includes administrative costs or third-party administrator (TPA) fees if you want to outsource the task of managing your health plan.

You’re also responsible for paying your employees’ medical claims. Healthcare costs can add up depending on how frequently your staff receives healthcare. To reduce your risk, you can buy stop-loss insurance, which reimburses you for catastrophic medical claims. But, stop-loss coverage requires monthly premium payments, which you must consider before opting for a self-insured plan.

Individual coverage HRA (ICHRA)

If you want the flexibility of a self-insured health plan without the financial risk or administrative headache, a health reimbursement arrangement (HRA) might be the answer. ALEs looking for an alternative to group health insurance may be especially interested in the individual coverage HRA (ICHRA).

An ICHRA is a health benefit for employers of all sizes. With an ICHRA, you set a monthly allowance that your employees can spend on out-of-pocket medical care, including individual health plans. Once an employee buys an eligible item and you approve it, you reimburse them tax-free up to their allowance limit. ICHRA reimbursements are payroll-tax-free for business owners and free of annual income taxes for participating employees.

Below are some other key features of the ICHRA:

• ALEs can use an ICHRA to satisfy the employer mandate if their benefit allowance is affordable. If you offer an ICHRA in 2025, your employees must not pay more than 9.02% of their household income for the lowest-cost silver plan on the local exchange.
  • ALEs who provide an ICHRA must also fulfill reporting requirements to determine the affordability of their benefit.
• The ICHRA has no minimum or maximum contribution limits or participation requirements. You can offer the benefit as long as you have a W-2 full-time employee.
• For added flexibility, you can vary ICHRA allowances and eligibility requirements based on employee classes.
• You only pay an employee after you approve their reimbursement request. Additionally, unused HRA funds stay with you at the end of the plan year or if an employee leaves your organization. This makes HRAs less financially risky for employers.

Your employees must have a qualified form of individual health coverage to use the ICHRA.

Some examples of ICHRA-acceptable ACA-compliant policies include:

• Qualified individual plans from a public health exchange
• Private exchange policies that provide MEC
• Student health insurance plans
• Medicare

To continue using the benefit, your employees must regularly attest that they still have qualified individual health coverage.

Which health plans aren’t ACA-compliant?

While many plans comply with the ACA, not every plan does. Many individuals may choose a non-compliant ACA health plan because they have more affordable premiums than ACA plans. But there’s a reason for the lower prices.

Non-compliant ACA health plans don’t provide MEC. Their limited coverage also lacks many of the ACA’s consumer protections. For example, they can have annual maximums, use medical underwriting, and exclude individuals with pre-existing conditions.

However, these plans may be good additions to your benefits package in addition to a major medical ACA-compliant policy. Supplemental or ancillary health plans can make your employee health benefit offering more comprehensive.

Non-ACA-compliant plans include:

• Short-term health insurance
• Accident insurance
• Indemnity plans
• Critical illness insurance policies
• Healthcare sharing ministries
• Medical discount plans
• Health stipends
• Prescription drug coverage

Employers can buy supplemental and ancillary coverage from a broker or insurance carrier.

Conclusion

Offering a health benefit with an ACA-compliant plan shouldn’t only be about avoiding costly penalties. It goes a long way toward attracting and retaining your best workers. Whether you choose a fully-insured plan, a self-funded option, or a customized ICHRA, complying with the ACA ensures you offer your employees essential coverage that keeps your workforce healthy and satisfied.

PeopleKeep and Remodel Health have what you need to help you offer an ICHRA at your organization! Reach out to an HRA specialist to learn more.