Last Updated: August 2026
More than 23 million Americans selected coverage through the Affordable Care Act marketplaces during the 2026 open enrollment period, down from the record 24.2 million a year earlier. The decline followed the expiration of enhanced premium tax credits on January 1, 2026.
There is a pattern worth understanding. The ACA is not a settled law. It has been amended, challenged, expanded, and rolled back almost continuously since 2010, and most of those changes land on whoever handles benefits and reporting at your company.
What is the ACA?
The goal of the ACA is to provide Americans with health insurance at a lower cost, regardless of their current health. One of the landmark changes in the act made it illegal for private insurance companies to discriminate based on pre-existing conditions. Because of the ACA, health insurance companies can no longer deny applicants based on their medical history.
The ACA also places an expectation on large employers to provide affordable insurance to their employees. Employers are now required to report their health insurance information to the federal government.
How the ACA Became Law
House Democrats introduced the first version in July 2009. Senator Ted Kennedy's death that August cost Senate Democrats their filibuster-proof majority, but the House passed its bill in November, and the Senate passed its own in December after Paul Kirk was appointed interim senator. When Democrats lost the supermajority in January 2010, the Senate used budget reconciliation to pass the bill with 51 votes. The House adopted the Senate version, and President Obama signed the ACA into law on March 23, 2010.
The Marketplace
The first marketplaces opened in October 2013 for coverage beginning January 1, 2014. Individuals compare plans and re-enroll each year, and all compliant plans must include essential health benefits and no-cost preventive care. All ACA-compliant plans must also include specific services and preventive care at no cost.
Low-income enrollees receive premium tax credits and cost-sharing reductions to help pay for deductibles and copays. That matters to employers for one specific reason: a full-time employee claiming a premium tax credit is what turns a coverage gap into an actual penalty.
People buy insurance through state-run exchanges. They can compare prices and enroll in a new plan each year.
Applicable Large Employers
An Applicable Large Employer (ALE) is an employer with 50 or more full-time and full-time equivalent employees. ALEs must offer minimum essential coverage to at least 95% of full-time employees and their dependents, and that coverage must be affordable and provide minimum value.
Should they not, they face a fine per full-time employee. Because of this requirement, ALE's must submit ACA reporting to the IRS each year. Employees are not mandated to enroll in the offered insurance, but to avoid fines, ALE's must show they at least offer health insurance to 95% of their employees.
The mandate phased in for employers with 100 or more employees in 2015 and dropped to 50 or more in 2016. ALEs file Forms 1094-C and 1095-C annually, which is where ACA reporting software earns its keep.
If you're a large company, ACA software is available to ensure compliance with IRS requirements.
What Are Recent Changes to the ACA?
There have been changes to the law employers and citizens should note.
Individual Mandate Penalty Reduced to Zero
The 2017 tax law set the individual penalty at $0 starting in 2019. The employer mandate was not repealed and remains fully enforced through Letter 226-J and Letter 5699.
State Mandates Filled the Gap
California, Massachusetts, New Jersey, Rhode Island, and Washington, D.C. added their own mandates and reporting rules, some stricter than the federal requirement. Vermont also has a mandate, but it carries no penalty and currently requires no separate employer filing.
The 2021 Supreme Court Ruling
On June 17, 2021, the US Supreme Court rebuffed the most recent challenge to ACA law by a 7-2 majority.
This ruling all but ends more challenges to the constitutionality of the ACA and ensures it will be the law for years to come.
Affordability Option for Families
A 2022 IRS rule, effective 2023, allows family members to qualify for subsidies when family coverage through an employer is unaffordable.
Work Requirements
Medicaid expansion was a vital piece of the original ACA legislation. Under the law, the Federal Government covered costs to states that expanded their Medicaid eligibility.
This change allowed states to require work requirements to the ACA process. States can force those who receive expanded Medicaid benefits to find work.
Electronic Filing
Since 2024, employers filing 10 or more information returns in aggregate must file electronically. Nearly every ALE now qualifies.
The 2024 Relief Laws.
The Paperwork Burden Reduction Act and Employer Reporting Improvement Act, both signed December 23, 2024, let employers furnish Form 1095-C on request rather than automatically, provided they post a clear and accessible notice. Employee consent to electronic delivery now carries forward until revoked, employers get 90 days instead of 30 to respond to a proposed assessment, and the IRS collection window is set at six years. Forms must still be filed with the IRS, and state furnishing rules still apply.
Where Does the ACA Stand in 2026?
Enhanced premium tax credits lapsed on January 1, 2026. Credits still exist under original ACA rules, but they are smaller, and the 400% poverty-level income cap has returned.
For employers, the indexed figures keep climbing. Coverage is affordable in 2026 if the employee contribution for the lowest-cost self-only plan stays at or below 9.96% of household income, up from 9.02% in 2025.
For 2026, the Section 4980H(a) penalty is $3,340 multiplied by the number of full-time employees, minus the first 30. The Section 4980H(b) penalty is $5,010 for each full-time employee who receives a premium tax credit. Both are calculated monthly. For 2027, those amounts rise to $3,780 and $5,670
Higher marketplace premiums also push more workers toward employer plans, and more premium tax credit claims mean more penalty triggers.
How Can You Stay Compliant?
The history of the ACA is not finished. Indexed figures update annually, states keep adding requirements, and control of Congress shifts every two years. The underlying obligation does not change: track full-time status, test affordability, and file accurately and on time.
Because of these changes, you must keep your company in compliance. Points North offers employers like you the latest ACA reporting software to ensure you stay on the right side of the law.
Contact us to talk through your ACA reporting requirements.
FAQ
Common questions about the Affordable Care Act and what it requires of employers.
President Obama signed the Affordable Care Act into law on March 23, 2010.
After Democrats lost their filibuster-proof Senate majority in a January 2010 special election, the House passed the Senate's bill unchanged on March 21, 2010 rather than attempt a conference committee. A separate companion bill, passed through budget reconciliation, amended the law on March 30, 2010.
The first health insurance marketplaces opened in October 2013 for coverage beginning January 1, 2014.
No, the employer mandate is still in effect and the IRS continues to enforce it. The 2017 tax law, which reduced the individual mandate penalty to $0 beginning in 2019, it did not touch the employer shared responsibility provisions under Section 4980H.
Applicable Large Employers must still offer affordable, minimum-value coverage to at least 95% of full-time employees, still file Forms 1094-C and 1095-C, and can still receive Letter 226-J proposing a penalty assessment or Letter 5699 for failure to file.
For plan years beginning in 2026, employer-sponsored coverage is considered affordable if the employee's required contribution for the lowest-cost, self-only, minimum value plan does not exceed 9.96% of household income. That is up from 9.02% in 2025.
For plan years beginning in 2027, the threshold rises again to 10.22, the first time it has crossed 10%.
Employers who fail the affordability test face a penalty of $5,010 per affected employee in 2026 under Section 4980H(b), rising to $5,670 in 2027.
There is no penalty for going without health insurance. The individual mandate penalty was reduced to $0 starting in 2019.
However, several states enacted their own individual mandates with their own penalties and reporting requirements, including California, Massachusetts, New Jersey, Rhode Island, and Washington D.C. Vermont also has a mandate, but it requires less than the other four states.
Employers with employees in those states may have state filing obligations that are a separate from, and in some cases stricter than, the federal requirement. Visit our State Mandate ACA Reporter page for more nuanced information about each state.
