Who has to offer health insurance under federal law?
Only applicable large employers. That means businesses with an average of at least 50 full time employees, including full time equivalents, during the previous calendar year. An applicable large employer must offer affordable coverage that provides minimum value to its full time employees and their dependents, or it may owe a payment to the IRS.
The IRS says the vast majority of employers are below that threshold and are not subject to the rule. These rules are known as the employer mandate or the employer shared responsibility provisions.
How do I count to 50?
A full time employee averages at least 30 hours a week, or 130 hours in a month. You turn everyone else's hours into full time equivalents by adding up their hours for the month, with no more than 120 hours per person, and dividing by 120. Add that to your full time count, add the 12 monthly totals and divide by 12.
| Business A | Business B | |
|---|---|---|
| Full time employees (30 or more hours a week) | 40 | 30 |
| Part time employees | 20 | 20 |
| Hours each part time employee works in a month | 90 | 60 |
| Full time equivalents (total part time hours divided by 120) | 15 | 10 |
| Total each month | 55 | 40 |
| Applicable large employer? | Yes | No |
Companies with a common owner, or that are related under certain tax rules, are generally combined to decide whether they are an applicable large employer, even if each would be under 50 alone.
If your workforce is above 50 for 120 days or fewer in the year, and the extra workers are seasonal, you are not treated as having more than 50. A new employer looks at the number it reasonably expects to employ during the current year. Our small business calculator gives a quick count of both kinds of full time equivalent.
What are the penalties if I am an applicable large employer?
There are two payments, and neither applies unless at least one full time employee gets a premium tax credit to buy a Marketplace plan. For 2027 the amounts are $3,780 and $5,670 per employee, according to IRS Revenue Procedure 2026-22.
| Situation | 2027 amount | How it is figured |
|---|---|---|
| You do not offer coverage to at least 95% of full time employees and their dependents | $3,780 for each full time employee, with the first 30 excluded | Based on all your full time employees minus 30, if at least one gets the premium tax credit |
| You offer coverage, but it is not affordable, does not provide minimum value, or a full time employee was not offered it | $5,670 for each full time employee who gets the premium tax credit | Based only on employees who receive the credit |
For example, an employer with 60 full time employees that offers no coverage owes (60 minus 30) times $3,780, which is $113,400 for 2027, if at least one employee receives the premium tax credit.
Coverage is affordable for 2027 when the employee's share of the lowest cost self only plan is less than 10.22% of household income, according to Revenue Procedure 2026-26. The IRS page on minimum value and affordability explains how to test your plan.
Do most small businesses offer health insurance anyway?
Many do, and the share rises with size. In KFF's 2026 survey, 59% of firms with 10 to 24 workers offer health benefits, 66% of firms with 25 to 49 workers and 87% of firms with 50 to 199 workers.
- 10 to 24 workers59%
- 25 to 49 workers66%
- 50 to 199 workers87%
- 200 or more workers98%
Source: KFF 2026 Employer Health Benefits Survey (firms with 10 or more workers)
The survey covers firms with 10 or more workers, so it does not describe the smallest businesses. Among firms with 10 to 199 workers that do not offer coverage, 46% named high cost as the most important reason and 13% said the firm is too small.
What happens if I do not offer coverage?
Under 50 full time employees, no federal payment applies. Your employees can still buy their own plans on the Marketplace and may qualify for savings. If you want to help without running a group plan, you can reimburse them through a CHOICE arrangement or a QSEHRA.
Your state insurance department can tell you about any rules in your state. A licensed agent can also compare what you would pay for a group plan with the cost of a fixed monthly budget.
Why might I offer coverage even though I do not have to?
Two reasons come from the rules themselves. Group health plan contributions are generally not taxed to the employee, and you may qualify for the Small Business Health Care Tax Credit, which is worth up to 50% of premiums if you meet its size and wage limits.
Our tax credit guide and calculator show whether you are likely to qualify. A quote shows what a plan would cost your business.
See our Small-Group Health plans
Real health benefits for a small team. We handle shopping, setup and renewals.Small business health insurance calculator: employee count and tax credit
Enter your full-time and part-time employees to see your full-time equivalent count, which rules apply to you and what the small business health care tax credit could be worth.
Get group plan prices for your team
A licensed agent compares small group plans and CHOICE arrangements from several carriers and shows you the monthly cost for you and your employees. It costs you nothing.