Large Employers

What is a large employer?

The ACA doesn’t have a consistent answer for that. An employer might be considered “large” for one rule, but not another. For this Toolkit, a large employer is one that has 50 or more employees.

Most of the sections in this guide apply to employers of this size. However, certain provisions apply only to even larger employers (such as those with 200 or more employees). Certain sections of this Toolkit briefly describe some rules that apply to these larger employers. Those sections can help you understand which ACA provisions apply to your company now, and which ones may apply in the future if your business grows.

Annual Limits

Effective for plan years beginning on or after Jan. 1, 2014, health plans may not place annual dollar limits on essential health benefits (EHBs). However, plans may impose annual limits on specific covered benefits that are not EHBs. “Restricted annual limits” were permitted for EHBs for plan years beginning before Jan. 1, 2014. However, restricted annual limits are no longer allowed for plan years beginning on or after Jan. 1, 2014.

EHBs are a core set of items and services intended to reflect the scope of benefits covered by a typical employer. Each state selects a benchmark insurance plan and, as a general rule, the items and services included in a state’s benchmark plan comprise the EHBs that insured health plans in the state’s individual and small group markets must cover.

Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered plans in the individual and small group markets are required to cover EHBs. The requirement to cover EHBs does not apply to grandfathered plans, self-insured group health plans and health plans offered in the large group market. To determine which benefits are EHBs for purposes of removing annual limits, a self-insured group health plan, large group market health plan or grandfathered plan may choose any benchmark plan from any state that was approved by HHS. Also, self-insured group health plans, large group market health plans and grandfathered plans can still exclude all benefits for a condition without being considered an annual limit, as long as no benefits are provided for the condition.

men working in warehouse of large employer
office workers for large employer

Limit on Cost-sharing (Non-GF Plans Only)

Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered group health plans are subject to limits on total enrollee cost-sharing for essential health benefits (EHBs), known as an out-of-pocket maximum.

  • For 2022, out-of-pocket expenses may not exceed $6,600 for self-only coverage and $13,200 for family coverage.
  • For 2023, out-of-pocket expenses may not exceed $6,850 for self-only coverage and $13,700 for family coverage.

Excessive Waiting Periods

A group health plan or issuer may not impose a waiting period that exceeds 90 days. A waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll becomes effective.

Eligibility conditions that are based solely on the lapse of time are permissible for no more than 90 days. However, other conditions for eligibility are permissible, as long as they are not designed to avoid compliance with the 90-day waiting period limit.

Pre-existing Condition Exclusions

Effective for plan years beginning on or after Jan. 1, 2014, group health plans and health insurance issuers may not impose pre-existing condition exclusions on any covered individual, regardless of the individual’s age. Prior to the 2014 plan year, pre-existing condition exclusions were already prohibited for individuals under age 19. A pre-existing condition exclusion is a limitation or exclusion of benefits related to a condition based on the fact that the condition was present before the individual’s date of enrollment in the employer’s plan.

Employer Obligations

Employer Shared Responsibility Penalties for Not Offering Required Coverage

Applicable large employers (ALEs)—those with 50 or more full-time employees (including full-time equivalent employees, or FTEs) —that do not offer affordable, minimum value health coverage to their full-time employees (and dependents) will be subject to penalties if any full-time employee receives a subsidy for health coverage through an Exchange. These employer mandate requirements are known as the “employer shared responsibility” or “pay or play” rules.

Determining Employer Size

The employer’s size for purposes of the employer shared responsibility rules is based on the average employee count for the prior calendar year. Part-time employees are included in the calculation according to a formula, but do not have to be offered coverage. Special rules apply for counting certain types of employees, including seasonal employees, volunteer employees and foreign employees. Companies with common ownership may have to be combined for purposes of this rule.

Penalty (If coverage is NOT offered by ALE: Applicable Large Employer)

A penalty of $2,970 (for 2024) per full-time employee minus the first 30 will be incurred if the employer fails to offer minimum essential coverage to 95 percent of its full-time employees and their dependents, and any full-time employee obtains coverage on the exchange.

Penalty (If coverage is deemed NOT affordable)

An employer will be subject to a penalty if the employer-sponsored coverage is unaffordable or does not provide minimum value, and if one or more full-time employees receive subsidized coverage through an exchange. An employee may qualify for subsidized coverage through an exchange if his or her household income is less than 400 percent of the federal poverty level and the employer’s plan is unaffordable or does not provide minimum value. The monthly penalty is equal to $4,460 (for 2024) divided by 12 for each full-time employee receiving subsidized coverage through an exchange for the month. However, the penalty will not be greater than the monthly penalty that would apply if the employer offered no coverage at all ($2,970 divided by 12, multiplied by the number of full-time employees employed during the applicable month, not counting the first 30 full-time employees). Only full-time employees, not full-time equivalents, are counted for purposes of calculating the penalty.

These penalty amounts will be adjusted annually for inflation, beginning in years after 2014. According to the IRS, the one-year delay for the employer shared responsibility rules, until 2015, does not affect this inflation adjustment.

Employer Reporting of Health Coverage (Code Sections 6055 and 6056)

The ACA created new reporting requirements under Internal Revenue Code Sections 6055 and 6056. Under these new reporting rules, certain employers will be required to provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees (such as information on the design and cost of their plans, as well as employees covered by the plan). Related statements must also be provided to employees.

These new reporting requirements apply to:

  • Employers with self-insured health plans (Code Section 6055)—Every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs and any other entity that provides minimum essential coverage must file information returns with the IRS reporting information for each individual who is provided with this coverage during the calendar year. Related statements must also be provided to covered individuals.
  • Applicable large employers (ALEs) (Code Section 6056)—ALEs subject to the ACA’s employer shared responsibility rules must file information returns with the IRS that reports the terms and conditions of the health care coverage provided to the employer’s full-time employees for the calendar year. Related statements must also be provided to full-time employees.

ALEs reporting under Section 6056 will use Forms 1094-C and 1095-C. In general, entities reporting under Section 6055 will use Forms 1094-B and 1095- B. However, ALEs that sponsor self-insured plans must report under both Section 6055 and Section 6056. These employers will use a combined reporting method on Forms 1094-C and 1095-C to report the information required under both Section 6055 and Section 6056.

Notice and Disclosure Requirements

Employers must provide all new hires and current employees with a written notice about the ACA’s health insurance exchanges (Exchanges). Employers were required to provide the notice to current employees no later than Oct. 1, 2023. As an ongoing requirement, employers must provide the notice to each new employee at the time of hiring.

The DOL also provided model Exchange notices for employers to use, which require some customization. The notice may be provided by first-class mail, or may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor are met.

According to the DOL, there is no fine or penalty under the ACA for failing to provide the notice. This means that employers cannot be fined for failing to provide employees with notice about the Exchanges.

Summary of Benefits and Coverage

Health plans (both insured and self-funded) must provide a Summary of Benefits and Coverage (SBC) to participants and beneficiaries. The SBC is a succinct document that provides simple and consistent information about health plan benefits and coverage in plain language. For insured plans, issuers must provide an SBC to the plan sponsor and may also send the SBC to participants and beneficiaries on behalf of an insured health plan.

Plans and issuers were initially required to provide the SBC to participants and beneficiaries for plan years beginning on or after Sept. 23, 2012. In addition, ongoing requirements for providing the SBC also apply. For group health plans, there are two different scenarios under which the SBC must be provided: (1) by a group health insurance issuer to a group health plan; and (2) by the issuer or plan to participants and beneficiaries.

A health insurance issuer must provide an SBC to a group health plan (or the plan’s sponsor):

  • Upon application for health coverage;
  • By the first day of coverage, if there was any change in information required to be in the SBC that was provided upon application and before the first day of coverage;
  • When the issuer renews or reissues the policy; and
  • Upon request.

Patient-Centered Outcomes Research Institute (PCORI) Fees

Health insurance issuers and self-funded group health plans must pay fees to finance comparative effectiveness research. These research fees are called Patient-Centered Outcomes Research Institute fees (PCORI fees), although they may also be called research fees, PCOR fees or comparative effectiveness research (CER) fees. The fees apply for plan years ending on or after Oct. 1, 2012.

Preventive Care Services (Non-GF Plans Only)

Effective for plan years beginning on or after Sept. 23, 2010, non-GF health plans must cover specific preventive care services without cost-sharing requirements. The covered preventive care services include:

  • Evidence-based items or services that have in effect a rating of A or B in the current recommendations of the United States Preventive Services Task Force;
  • Immunizations for routine use in children, adolescents and adults that are currently recommended by the Centers for Disease Control and Prevention (CDC) and included on the CDC’s immunization schedules;
  • For infants, children and adolescents, evidence-informed preventive care and screenings provided for in the Health Resources and Services Administration (HRSA) guidelines; and
  • For women, evidence-informed preventive care and screening provided in guidelines supported by HRSA (for plan years beginning on or after Aug. 1, 2012).

Dependent Coverage Up to Age 26

Effective for plan years beginning on or after Sept. 23, 2010, group health plans and health insurance issuers that provide dependent coverage of children must make coverage available for adult children up to age 26, regardless of the child’s student or marital status. There is no requirement to cover the child or spouse of a dependent child.

This requirement applies to GF and non-GF plans. However, prior to the 2014 plan year, GF plans were not required to cover adult children who were eligible for other employer-sponsored coverage, such as coverage through their own employer.

ACA also added a tax provision related to health insurance coverage for these adult children. Effective March 30, 2010, amounts spent on medical care for an eligible adult child can generally be excluded from taxable income. In addition, all states should now be in conformity with this federal tax law change.

Lifetime Limits

Effective for plan years beginning on or after Sept. 23, 2010, health plans and health insurance issuers are prohibited from imposing lifetime limits on the dollar value of essential health benefits.


Group health plans and health insurance issuers may not rescind coverage for covered individuals, except in the case of fraud or intentional misrepresentation of a material fact. A “rescission” is a cancellation or discontinuance of coverage that has a retroactive effect. A termination of coverage that has a retroactive effect is permissible if it is due to the participant’s failure to pay required premiums or contributions for the coverage.

This prohibition applies to GF and non-GF health plans, whether in the group or individual market, and whether coverage is insured or self-funded.