Before we get started, let’s cover a brief overview of what the Affordable Care Act is and take a look at how they define an ALE for tax purposes. The Affordable Care Act, otherwise known as the ACA was signed into law by President Obama in 2010, aiming to expand healthcare coverage, establish the healthcare marketplace for businesses and individuals alike to shop for alternative benefit solutions, and lastly to enforce consumer protections to be more inclusive. 

Some of those new changes require coverage to not deny benefits based on pre-existing conditions, cover essential health benefits and preventive care at no cost, and extend dependent coverage until the age of 26. For further explanation of the ACA you can read more from KFF here. 

As your business grows and approaches ALE status, you need to understand the definitions and implications of the penalties. ACA defines an ALE as any company with 50 or more full time equivalent employees. This means you can employ both W2 workers and part time or seasonal employees, and if they work at least 30 hours per week or 130 hours per month, they go towards your total full time employee headcount. You can use this simple calculator from ACWise to see how your team stacks up. 

Now that you understand where you stand as an ALE, let’s review the penalties for non-compliance. For companies not offering health coverage, the penalty is $2,970. For not offering affordable coverage that meets minimum essential care value, the fee is $4,460 per employee. For group sponsored health plans, the fees vary but are still substantial—you can view specifics here from SHRM. 

Now that we have the important framework stood up, let's move on to shopping for the best employee benefits for your team. If you’re going to scale your business in 2025, you’ll need to know what questions to ask and how to spot those red flags we mentioned before. So let’s dive in. 

1. Understand Your Workforce Needs

Before diving into plan options, evaluate your team’s demographics and preferences. Consider taking a company wide census to update your records if you have not done so recently. This will also lay the groundwork for a smooth tax filing. 

Consider the following:

• Employee composition: Do you primarily have full-time W2 employees or a mix of W2 and 1099 contractors? Remember an ALE is defined as a company with 50+ full time or full time equivalent employees. Refer to this calculator for your company's final annual headcount. 
• Usage patterns: Are your employees likely to need extensive health coverage, or will they value preventive care and wellness perks? Take a look at your census and observe the age differences, lifestyles, and the like. Those approaching medicare age are looking for different benefits than your single GenZ employee. Be sure to shop plans that have options for medical, dental, vision, and voluntary benefits. ‍
• Flexibility requirements: Seasonal or gig-focused businesses may benefit from plans that adjust to staffing fluctuations. Look for plans with guaranteed approval, no waiting periods, and open enrollment year-round, like Meridio. Understanding these factors will help narrow your options and ensure the plan you choose aligns with your business dynamics. 

2. Know Your Coverage Options

The health insurance landscape offers more than just traditional plans through brokers. We understand you may have a long history with your broker and now that you’re growing it may be time to consider alternatives. Signing the ACA into law in 2010 has opened the state and federal marketplace for insurance carriers to provide various health options. 

Here are some alternatives to consider:

• Self-funded plans: You pay for employees’ claims directly, usually with stop-loss insurance to cap your risks. This can be cost-effective for businesses with a younger or healthier workforce. Using self-funded plans with a stop-loss provider and a third-party administrator can be great to protect employers against unexpected employee healthcare costs, but they also come with considerable risks. Check out these FAQs from RedDirect Health. 
• Level-funded plans: These are a hybrid option where you pay a set monthly amount, and unused funds may be refunded. These plans offer predictability and cost control if the claims of your employees are lower than expected. If claims go over the expected amount, your stop-loss policy would cover the difference. Like other features, you pay a monthly premium for stop-loss coverage to protect your business. For more questions regarding level-funded plans read on here. 
• Association health plans (AHPs): Pool with other small businesses to access large-group pricing and benefits. Take advantage of large group discounts and design plans around large business practices. These plans also allow you to negotiate better rates from providers 
• Direct-to-consumer partnerships: Companies like Meridio offer everyday health plans with ACA-compliant straightforward health benefits with transparent pricing for small businesses without the need for a broker. Direct-to-consumer healthcare plans offer companies the ability to meet ACA requirements and also lower premiums while keeping their quality of convergence high. For more information on Meridio’s everyday health options click here. 

3. Watch Out for Red Flags

Not all health plans are created equal. There are pros and cons of each of the suggested plans above. Be sure to weigh your options, look carefully at your budget. Be sure you consult your accountant or tax professional to understand your budget. This will give you a clear outlook when considering healthcare options. 

Be on the lookout for these warning signs:

• Limited networks: Some plans boast low premiums, but restrict employees to a narrow network of providers, which can frustrate your team. Ask ahead of time for a provider look up or a geo map of physicians in the network. 
• Unclear pricing structures: If it’s difficult to understand what’s included in the premium or what additional fees apply, proceed cautiously. Things like hidden fees and surcharges are things to look for when exploring options.  
• Low actuarial value: Plans that cover less than 60% of expected healthcare costs might leave employees footing substantial bills.
• Hidden exclusions: Look out for fine print that excludes commonly needed services, such as maternity care or behavioral or mental health coverage.
• Rigid terms: Plans that don’t allow adjustments for staffing changes can cost you significantly during hiring cycles. Look for enrollment periods, onboarding options, and flexible terms. 

4. Seek to Lower Premiums While Keeping Quality Coverage

Balancing affordability with comprehensive benefits is key. Be sure you fully understand the scope of coverage before proceeding with enrollment. With a flexible workforce depending on the time of year, you’ll want to keep in mind health benefit options that apply to your workforce as a whole. 

Here’s how to make it happen:

• Encourage preventive care: Plans that emphasize regular check-ups and wellness programs often save costs in the long run by reducing expensive emergency care. Review the prevention care exclusions list of any plan option to be sure regular expected services are not excluded. 
• Offer tiered coverage: Provide options for employees to choose the level of coverage they need, sharing premium costs for higher tiers. This includes coverage for W2 employees as well as minimum essential coverage for part time employees. 
• Use technology: Leverage tools to streamline enrollment and benefit management, reducing administrative overhead. This includes system messages such as SMS, email, and call reminders regarding benefits coverage, updates, and renewal. Personalized service is essential to quality healthcare in the future. 
• Explore tax incentives: Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) can help employees save on healthcare costs while reducing your payroll tax liability. Benefits plans that include these types of savings can help employees cover costs without spending out-of-pocket each month. 
• Shop regularly: The insurance market evolves constantly, and reviewing your options annually ensures you’re always getting the best deal. Regulations and yearly offerings differ depending on the season. Be sure to browse the best employee benefit offerings when it comes to healthcare and you will never be out of the loop. 

5. Avoid “Too Good to Be True” Options

Some plans may look appealing on the surface but fall short for businesses like yours. As a growing business with a diverse workforce you must remember to keep your employees in mind. They are the backbone of your business and it’s your obligation to provide health coverage that is accessible and affordable. 

Be cautious of:

• Overly low premiums: These often signal limited coverage or high out-of-pocket costs. Look carefully at the coverage offered and see what preventive, and basic healthcare is covered, and what services are excluded, these are questions you should ask when considering new health plans for your team. 
• One-size-fits-all plans: Your workforce is unique, and generic plans might not align with your needs. Understand the health offerings and know they offer variable pricing and flexibility to include the diverse workforce you have on a rolling basis. 
• High deductibles with no support: While high-deductible health plans (HDHPs) can lower premiums, they’re only effective if paired with HSAs or robust employee education. These plans offer a lucrative option for employees looking for full coverage with low premiums. Review plans carefully. 

6. Build Trust with Your Provider

You’re not just buying a plan; you’re forming a partnership. Look for benefits providers who offer end to end support, lower premiums, year-round guidance, and flexible, affordable benefits converge. 

Look for providers who:

• Offer transparency: Clear, upfront pricing and detailed plan information are essential. Check the network, and look for known providers within the network. 
• Provide support: A provider who offers easy-to-access customer service and enrollment assistance saves you time and headaches. Ask questions around the level of support, time of year, and accessibility. 
• Value flexibility: As a growing business, you need a partner that can scale with you. Be sure the healthcare provider has a plan options that scale for the growth of your team from W2 employees to part time and seasonal or contract employees. 

Take the Next Step

Shopping for health benefits doesn’t have to be overwhelming. By understanding the ACA regulations, knowing your workforce demographics, exploring alternative options, and knowing what to watch out for, you can confidently choose a plan that supports your employees, your growing business, and your bottom line. 

Here are some ACA compliance FAQs to help you along the way.

Want a deeper dive? Download our free guide, “How to Shop for Employer Health Plans: A Cheat Sheet for Growing Businesses,” to get actionable tips and a checklist to make your search easier.