A caregiver worked 22 hours some weeks and 48 in others. She picked up every holiday shift, then cut back when her own child was sick. At open enrollment she asks whether she can get the health plan, and the honest answer from the office is "it depends how you count."
The ACA look-back measurement period is how an applicable large employer counts. For agencies with variable-hour caregivers, it is the difference between a predictable benefits list built once a year and a monthly scramble that risks penalties. This guide explains the periods, the rules for new hires, a worked example timed to open enrollment, and the 2027 affordability figure, so payroll and HR can check the list before offers go out.
Who This Applies To
The employer shared responsibility provisions of Internal Revenue Code section 4980H apply to applicable large employers. The IRS questions and answers on the employer shared responsibility provisions explain that an employer is an ALE for a calendar year if it employed an average of at least 50 full-time employees, including full-time equivalent employees, in the preceding calendar year. Businesses under common ownership are combined for this test.
A full-time employee for these purposes averages at least 30 hours of service per week. Under 26 CFR 54.4980H-1, 130 hours of service in a calendar month is treated as the monthly equivalent. An hour of service includes each hour paid or entitled to payment for work, and each hour paid for vacation, holiday, illness and similar leave.
The IRS Q&A describes two ways to identify full-time employees. The monthly measurement method counts each month on its own. The look-back measurement method decides status for a future period based on hours in a past one, and the Q&A notes it is available only for determining and computing liability for a payment, not for deciding whether the employer is an ALE.
The Three Periods
Under 26 CFR 54.4980H-3(d), the look-back method for ongoing employees uses three periods.
- Standard measurement period. A period of at least 3 and no more than 12 consecutive months that you choose. The regulation's own example suggests a 12-month period that ends shortly before the plan's open enrollment.
- Administrative period. Optional, up to 90 days, between the end of the measurement period and the start of the stability period. You use it to calculate hours, notify employees and enroll them. It may not shorten or lengthen the measurement or stability period, and employees already covered from the prior measurement period must stay covered through it.
- Stability period. The period during which status is locked. If the employee averaged at least 30 hours a week during the measurement period, you must treat them as full time for the whole stability period, regardless of hours worked during it, as long as they remain employed. The stability period must be at least six consecutive calendar months and no shorter than the measurement period. If they averaged under 30, you may treat them as not full time for a stability period no longer than the measurement period.
Measurement periods may differ for certain categories, including hourly and salaried employees and employees whose primary places of employment are in different states, as long as each category is treated uniformly.
Worked Example: An October Measurement Period
The regulation includes an example built on a calendar-year plan. Translated to an agency:
- Standard measurement period: October 15, 2025 through October 14, 2026.
- Administrative period: October 15 through December 31, 2026, used to total hours, send eligibility notices, run open enrollment and enroll.
- Stability period: January 1 through December 31, 2027.
Three caregivers, all employed for the full measurement period:
- 1.Caregiver A recorded 1,650 hours of service across the 52 weeks. 1,650 divided by 52 is 31.7 hours a week. She is full time for all of 2027, even if she drops to 20 hours a week in February.
- 2.Caregiver B recorded 1,500 hours. 1,500 divided by 52 is 28.8. She may be treated as not full time for 2027, even if she works 40 hours a week from January.
- 3.Caregiver C was full time in the prior measurement period and is enrolled. If her new average falls below 30, she keeps coverage through December 31, 2026, because the administrative period overlaps the prior stability period.
The hours that matter are hours of service, not just visit hours. Paid holiday, paid sick time and paid travel time between clients all count, so pull totals from payroll, not from the schedule.
New Variable-Hour Caregivers
A variable hour employee, defined in 54.4980H-1, is one whose hours at the start date are uncertain enough that the employer cannot determine whether they are reasonably expected to average 30 hours during the initial measurement period. Most per-diem caregivers fit.
For these new hires, 54.4980H-3(d)(3) allows an initial measurement period of 3 to 12 months, starting on the start date or any date up to the first day of the following month. Two limits apply:
- The administrative period for a new hire must not exceed 90 days in total, and it counts every gap between the start date and the first offer of coverage other than the initial measurement period itself. A gap between the start date and the first of the next month counts.
- The initial measurement period and administrative period together cannot extend beyond the last day of the first calendar month beginning on or after the first anniversary of the start date.
Example. A caregiver starts on November 18, 2026. The agency uses a 12-month initial measurement period starting December 1, 2026 and ending November 30, 2027. The first anniversary is November 18, 2027, and the first calendar month beginning on or after it is December 2027. Coverage must be offered by January 1, 2028 if she averaged 30 hours, which keeps the combined periods within December 31, 2027. The administrative period totals 13 days in November 2026 plus 31 days in December 2027, 44 days in all, under the 90-day limit.
Once a new hire has been employed for a full standard measurement period, 54.4980H-3(d)(4) requires testing them in that standard period too, alongside ongoing employees.
Breaks in Employment
Caregivers leave and come back. Under 54.4980H-3(d)(6), an employer that is not an educational organization may treat a returning employee as terminated and rehired, and so as a new employee, only if they had no hours of service for at least 13 consecutive weeks. An optional rule of parity also allows new-employee treatment after a break of at least 4 consecutive weeks that is longer than the employee's preceding period of employment. Shorter breaks count as zero hours inside the existing measurement period. Decide your policy once, write it down, and apply it the same way to everyone.
Affordability for 2027 Plan Years
Offering coverage is half the test. Coverage must also be affordable. The IRS Q&A states that coverage is affordable if the employee's required contribution for the lowest-cost minimum value plan is no more than 9.5 percent, as adjusted, of household income, and describes three safe harbors that use information employers have, including W-2 wages and rate of pay.
For plan years beginning in 2027, Revenue Procedure 2026-26 sets the adjusted required contribution percentage at 10.22%.
Under the rate of pay safe harbor in 26 CFR 54.4980H-5, the test for an hourly employee uses 130 hours multiplied by the lower of the hourly rate on the first day of the coverage period or the lowest rate during the month. For a caregiver paid $16 an hour:
- 130 hours x $16 = $2,080 assumed monthly income.
- $2,080 x 10.22% = $212.58.
- A self-only employee contribution at or below $212.58 a month for the lowest-cost minimum value plan meets the safe harbor for that caregiver.
Use the lowest rate in your hourly scale, not the average, when setting a single contribution for everyone.
What Goes Wrong at Open Enrollment
- Counting scheduled hours instead of paid hours. Paid leave and paid travel are hours of service.
- Rebuilding the list in November. If the measurement period ends October 14, the hours are final that day. Running the report in mid-October leaves the full administrative period for notices and enrollment.
- Dropping enrolled employees early. Coverage from the prior stability period continues through the administrative period.
- Ignoring rehires. A returning caregiver may be a continuing employee whose old hours count, not a new hire.
- Using last year's affordability percentage. It changes every year.
Keeping the Hours Clean
The look-back method only works if hours of service are complete, consistent and traceable to payroll. Nuraflow is being designed so that payroll and accounting prepares pay from approved visits, shifts and travel with adjustment history, and so that workforce management keeps employee status and history in one record from application to separation.
This article is general information, not tax or legal advice. ACA employer mandate rules are technical and fact-specific; confirm your measurement method, break-in-service policy and affordability calculations with a benefits attorney or qualified tax adviser.