Record ACA Enrollment in 2025: Increased Employer Penalty Risk

Record-Breaking ACA Enrollment Numbers

The Affordable Care Act (ACA) marketplaces have achieved record-high enrollments in 2025, with 24.3 million individuals now covered through federal and state exchanges. This represents a substantial 13% increase from 2024 enrollment figures and more than doubles the enrollment numbers from 2021.[1]

This dramatic increase in marketplace participation was largely driven by the enhanced premium tax credits introduced through the American Rescue Plan Act in 2021 and extended through 2025 by the Inflation Reduction Act. These subsidies have made health coverage more affordable for millions of Americans across different income levels.

Heightened Employer Penalty Risk

For employers—particularly those qualifying as Applicable Large Employers (ALEs) with 50 or more full-time equivalent employees—this record enrollment raises the risk of ACA penalties in 2025. Here's why:

Increased Exposure to Potential Penalties

With more individuals than ever enrolled in marketplace plans and receiving premium tax credits (PTCs), the chances are higher that some of these individuals could be employees who should have been offered qualifying coverage by their employers.

Keep in mind that the IRS cross-checks marketplace enrollees receiving subsidies against employer reporting forms (1094-C/1095-C). Each full-time employee who receives a PTC through the marketplace can lead to employer penalties if:

The employer did not offer minimum essential coverage to at least 95% of full-time employees (4980H(a) penalty).
The employer offered coverage that was either unaffordable or didn't meet minimum value requirements (4980H(b) penalty).

2025 Penalty Amounts

The Internal Revenue Service (IRS) has lowered the 4980H(a) penalty amount for 2025 to $2,900 annually ($241.67 monthly) for each full-time employee, down from $2,970 in 2024. While this represents a small decrease, the potential financial impact remains substantial.[2]

For the 4980H(b) penalty in 2025, employers face $4,350 per year ($362.50 per month) for each full-time employee who receives a marketplace subsidy.[3]

Example Scenario

Imagine a company with 100 full-time employees that offers a health plan to all full-time employees but fails to make the coverage affordable for 10 employees. Those 10 employees then get subsidized marketplace coverage.

In this case, the potential 4980H(b) penalty could reach $43,500 ($4,350 × 10 employees) for the year.

Enforcement Mechanisms Strengthened

The IRS has been increasing efforts to enforce ACA compliance. The Inflation Reduction Act provided more funding for IRS tax enforcement, including ACA-related penalties. Although future funding is uncertain due to changes in legislation, beginning in 2025, employers will have more time to respond to Letter 226J penalty notices (increasing from 30 to 90 days). This change suggests the possibility of stricter enforcement in the future.

Action Steps for Employers

To reduce the risk of penalties in today’s high-enrollment environment, employers should:

Review employee classifications: Ensure all full-time employees (those averaging 30+ hours weekly) are properly identified based on ACA rules.
Verify affordability: For 2025, coverage is considered affordable if the employee’s cost for self-only coverage doesn’t exceed 9.02% of household income (using the safe harbor methods).[4]
Document offers of coverage: Keep detailed records of all coverage offers made to employees.
Ensure accurate reporting: File timely and accurate 1094-C/1095-C forms to demonstrate compliance with ACA requirements.
Be prepared for Letter 226J: Have systems in place to quickly respond if you receive a penalty assessment notice from the IRS.

The combination of record-high marketplace enrollment, expanded IRS enforcement, and the large number of individuals receiving premium tax credits creates a perfect storm for ACA penalty risks in 2025. Taking proactive steps to ensure compliance is more important than ever for employers seeking to avoid costly penalties. If you need help, contact your American Fidelity account manager or read more about ACA compliance on our blog page.

This blog is up to date as of August 2025 and has not been updated for changes in the law, administration or current events.