Is your agency an Applicable Large Employer?
Count full-time employees (30+ hours a week or 130+ a month) and add full-time equivalents from everyone else: total part-time hours in the month ÷ 120. Average the monthly totals over the prior calendar year.
Worked example. An Arizona agency has 35 caregivers and office staff at 130+ hours a month, plus 48 part-time caregivers averaging 45 hours a month.
- Full-time employees: 35
- Part-time FTEs: 48 × 45 = 2,160 hours ÷ 120 = 18
- Total: 53 → the agency is an ALE.
Two home care specifics. Entities under common ownership are combined under the controlled-group rules, so multiple agency LLCs or franchise territories with the same owners count as one employer. And caregivers with variable hours can be classified using the IRS look-back measurement method (a 3–12 month measurement period followed by a stability period), which is how most agencies decide who must be offered coverage without re-running the math every month.
What an ALE owes if it doesn't comply (2026 amounts)
- 4980H(a), no offer: if you don't offer minimum essential coverage to at least 95% of full-time employees and any one of them gets a subsidy on HealthCare.gov, you owe $3,340 per full-time employee minus the first 30. In the example above: (35 − 30) × $3,340 = $16,700 a year, triggered by a single subsidized caregiver.
- 4980H(b), unaffordable offer: if you offer coverage that's unaffordable or below minimum value, you owe $5,010 for each full-time employee who enrolls in a subsidized marketplace plan.
Which Arizona caregivers can actually trigger a penalty
Penalties are only triggered when a full-time employee actually receives a premium tax credit on the marketplace. Who can get one depends on income:
| Caregiver household income | Can they get a marketplace subsidy? | Can they trigger a penalty for you? |
|---|---|---|
| Below 138% FPL | No. Arizona expanded Medicaid, so adults to 138% FPL qualify for Medicaid and cannot receive a marketplace credit | No |
| 138%–400% FPL | Yes | Yes — each one is a potential $5,010 (b) trigger, or the single trigger for the (a) penalty |
| Above 400% FPL | Generally no in 2026, now that the enhanced credits have expired | No |
Arizona expanded Medicaid through AHCCCS; adults up to 138% FPL qualify, so most minimum-wage caregivers are Medicaid-eligible rather than subsidy-eligible. kff.org ↗
Arizona uses the federal marketplace, HealthCare.gov. healthcare.gov ↗
What counts as "affordable" for an Arizona caregiver in 2026
Coverage is affordable if the caregiver's self-only contribution is no more than 9.96% of household income. Since you can't know household income, the IRS provides three safe harbors:
| Safe harbor | How it's calculated | 2026 monthly ceiling for an Arizona caregiver |
|---|---|---|
| Federal poverty line | FPL × 9.96% ÷ 12 | $129.89 regardless of wage |
| Rate of pay | Lowest hourly rate × 130 hours × 9.96% | $196.16 at the $15.15 minimum |
| W-2 wages | 9.96% of Box 1 wages | Varies; known only after year-end |
The Arizona-specific point: because the state minimum wage is $15.15, the rate-of-pay safe harbor gives Arizona agencies far more room than the $129.89 FPL figure most national guides quote. An agency paying $15.15 can charge up to $196.16 a month for self-only coverage and still be safe from the (b) penalty. Use each caregiver's actual lowest hourly rate; where local minimums are higher, the ceiling is higher still.
A CHOICE (formerly known as ICHRA) counts as an offer of coverage. It's affordable if the caregiver's cost for the lowest-cost self-only silver plan on HealthCare.gov for their rating area, minus your monthly allowance, stays within the 9.96% test.
IRS Rev. Proc. 2025-25 ↗ · IRS HRAs ↗ · minimum wage → see the Arizona wage & hour page
2026 federal compliance calendar (Arizona adds nothing to this list)
| Date | Obligation | Who | Authority |
|---|---|---|---|
| Ongoing | Track caregiver hours under your measurement/stability periods | ALEs | IRS |
| Mar 2, 2026 | Furnish Form 1095-C to full-time employees, or post a website notice and furnish within 30 days on request | ALEs | IRS |
| Mar 31, 2026 | E-file Forms 1094-C/1095-C with the IRS (e-filing required at 10+ returns) | ALEs | IRS |
There is no Arizona filing, no Arizona furnishing deadline, and no Arizona penalty. If you also employ caregivers who live in California, New Jersey, Massachusetts, Rhode Island, or DC under a self-insured plan, those states' reporting rules may apply to those employees; see the state-by-state ACA hub.
Arizona continuation coverage (mini-COBRA)
Arizona's continuation law (effective 2019) requires employers with fewer than 20 employees to offer up to 18 months of continuation coverage mirroring federal COBRA. azleg.gov ↗
What Arizona does not require
Arizona has no state individual mandate or 1095 reporting, no auto-IRA program, and no paid family leave program (paid sick time applies under Prop 206, covered separately from health benefits). cri.georgetown.edu ↗
Frequently asked questions
We have 48 full-time caregivers and a handful of part-timers. Are we under the threshold?
Probably not. Add the part-timers' monthly hours and divide by 120. Two part-timers at 120 hours a month between them add one FTE, which puts you at 49; a third pushes you to 50 and ALE status the following year.
Does Arizona require us to file anything about health coverage with the state?
No. Arizona has no state individual mandate and no state 1095 reporting. Your only filing is federal (1094-C/1095-C) if you're an ALE.
Can a caregiver on Medicaid trigger a penalty against us?
No. Penalties are triggered only by full-time employees who receive a marketplace premium tax credit. Arizona caregivers below 138% FPL qualify for Medicaid instead, so they can't trigger 4980H. Caregivers between 138% and 400% FPL can.
We pay the Arizona minimum of $15.15. What's the most we can charge for self-only coverage?
Under the rate-of-pay safe harbor, $15.15 × 130 hours × 9.96% = $196.16 a month in 2026. That's well above the $129.89 FPL figure, so rate of pay is the better harbor for Arizona agencies.
Does a CHOICE (ICHRA) count as offering coverage in Arizona?
Yes. An affordable CHOICE (ICHRA) satisfies both the 4980H(a) offer requirement and the (b) affordability test, measured against the lowest-cost silver plan on HealthCare.gov for each caregiver's rating area.
We're under 50 FTEs. Is there any reason to offer coverage?
No mandate applies, but agencies under 50 commonly offer a MEC or CHOICE (ICHRA) to reduce turnover, and the same affordability math determines what you can charge caregivers.
Not legal advice. Confirm details with the cited official sources or counsel. Full disclaimer
- https://cri.georgetown.edu/states/
- https://www.azleg.gov/ars/20/02330.htm
- https://www.healthcare.gov
- https://www.irs.gov/affordable-care-act/employers/identifying-full-time-employees
- https://www.irs.gov/affordable-care-act/employers/information-reporting-by-applicable-large-employers
- https://www.irs.gov/newsroom/health-reimbursement-arrangements-hras
- https://www.irs.gov/pub/irs-drop/rp-25-25.pdf
- https://www.irs.gov/pub/irs-drop/rp-25-26.pdf
- https://www.kff.org/medicaid/status-of-state-medicaid-expansion-decisions/