Health Care Reform

Health care reform is a signature issue for the Obama administration, which has called for an overhaul of the existing health insurance and delivery systems to ensure that all Americans have access to affordable health care. Congress completed action on two reform bills that were designed to achieve these goals. Nonprofit organizations engaged in the policy debate because reforms presented the opportunity to reduce the costs that nonprofits pay as employers and to extend health care coverage to the individuals served by the nonprofit community.

National Council of Nonprofits' FAQs and in-depth coverage of how the ACA affects nonprofits.


President Obama signed into law and the U.S. Supreme Court upheld the majority of the Patient Protection and Affordable Care Act, ("ACA"). By 2014, Health and Human Services (HHS) must write the regulations for employers in providing insurance, and states that choose to do so must set up their own health insurance exchanges. The federal government is assuming the responsibility for states that refuse to set up their own exchanges.

Why it Matters

The Affordable Care Act, among other reforms, extends access to coverage for the uninsured and prevents the denial of insurance for pre-existing conditions. It contains several provisions that would help nonprofit employers control health care costs, including the mechanism for individuals and employers to buy lower-cost health insurance as a part of purchasing pool. The Marketplaces that will be available in each state will offer all employers with fewer than 100 employees and individuals with incomes between 133% and 400% ($24,352 – $73,240) of federal poverty level the option to participate in the exchanges, effective January 1, 2014. (Enrollment starts October 1, 2014.) Larger employers (with more than 100 employees) are expected to be able to participate in the Marketplaces after 2017. Read about the SHOP Marketplaces where small nonprofit employers can purchase insurance for their employees and where individuals can purchase health insurance for themselves.

  • Small Employer Health Credit: The Affordable Care Act also provides a tax credit (in the form of a refund for tax-exempt employers) that allows small tax-exempt employers (25 employees or fewer, with average wages less than $50,000 per year) to deduct 25% of qualified health costs for the period 2010-2013, as adjusted for sequestration. The amount is increased to 35% of qualified cas of  2014. 
  • In Phase I (2010-2013), small nonprofit employers can take a credit (in the form of 25 percent of the employer contribution for employee insurance premiums) and apply that credit to taxes withheld through payroll (and employees would still get full credit for taxes withheld from their pay).
  • In Phase II (2014-onward), the amount of the credit increases to 35 percent. 
  • Update: The Internal Revenue Service announced that nonprofits will see an 8.7 percent reduction in the savings they are otherwise entitled to under the Small Employer Health Credit as a result of sequestration.

Nonprofits can claim the full 25 percent of the health credit if they pay at least half of the employee premium and employ fewer than 10 workers that are each paid average wages of less than $25,000. The employer can apply the full credit to the aggregate amount of actual premiums paid or a lesser average premium amount, as determined by the U.S. Department of Health and Human Services (HHS). More information about which employers are eligible, and how to file for the credit.

Additional Resources