As a small business owner, your employees are like family. And, just like with family, you want to do everything you can to meet their needs and keep them happy.
You’ve probably put a lot of thought into whether you should offer employees health insurance plans, and what types of coverage you should provide. After all, surveys show offering a comprehensive benefits package that includes healthcare coverage is important in retaining and attracting the best employees for your company.
But, as a small business, are you required to offer group health insurance plans, and are there any requirements within those plans you must meet? Purchasing group coverage for your small business has different rules than if you were buying coverage only for yourself or family.
Below are common questions about the basics behind group coverage and the answers you need to know before purchasing group coverage for your small business.
What Is Group Coverage?
Understanding the basics of group coverage is important. Even though more than one person may be covered under a policy, that in itself is not considered group coverage.
Group coverage is a single policy that is issued to a group, such as a small business with employees. This policy covers eligible employees, and depending on the policy, sometimes their dependents. A single policy that is issued to one individual or a family is considered individual medical coverage.
Why is it important to differentiate between the two? The rules are different for individual coverage versus group coverage. In group coverage, for example, the insurer uses general information about the group, such as age, to determine a premium price that is based on risk factors. One person in the group does not pay more than another person in the group.
Is Providing Insurance A Requirement?
It depends. Small business owners are required to provide health insurance to their employees, but only if they employ 50 or more full-time-equivalent workers. The Affordable Care Act stipulates that small businesses with fewer than 50 do not have to provide group coverage, and will not be penalized if they choose not to offer it.
It may seem cut and dry. However, as you know, small businesses typically hire seasonal employees, which makes determining how many full-time employees you have a little more complicated.
The government determines whether you are considered a large employer (a business with 50 or more full-time employees) on a calendar-year basis and takes into account the previous year. That means you may have to provide health insurance to employees in 2019 if you had 50 or more full-time employees in 2018.
So, you’re not considered a large employer and are not required to offer health insurance if:
You employed fewer than 50 full-time employees on average during the previous calendar year, or
You employed more than 50 full-time employees no more than 120 days during the previous calendar year due to a seasonal workforce.
Need further help determining whether your staff numbers require you to offer healthcare coverage? This FTE calculator helps you determine this and whether you qualify to purchase coverage in the SHOP Marketplace.
Is My Business Still Eligible For Group Coverage?
Absolutely. In fact, federal law states insurers must provide group coverage to small employers, which is defined as having 2 to 50 full-time employees, if the business owner wishes to include health coverage in a benefits package. Other requirements on the part of the insurer include:
Owners can count as employees. This means if you are a sole owner, but have one employee, you generally can get group coverage. If you are in a partnership with another owner, you both can receive group coverage as well.
Employees’ health status does not negate eligibility. Insurers must offer small businesses group coverage regardless of any health conditions an employee is experiencing or has experienced.
What Are My Requirements?
If you choose to offer group health coverage to your full-time employees, you must offer coverage to all of your full-time employees. You cannot offer coverage to the marketing department, for example, but not the customer service department. You also cannot offer coverage to employees who have no medical conditions, but not offer it to employees who have a medical condition.
You can, however, only offer coverage to full-time employees, but not offer coverage to part-time employees. Workers are considered part-time if they work fewer than 30 hours per week.
However, if you offer health coverage to one part-time employee, you must offer it to all part-time employees.
Generally under most group plans, dependents of eligible employees also are eligible for coverage. A person is considered a dependent if he or she is a spouse, child or in some states, an unmarried domestic partner. In California, for example, any group policy that covers spouses must extend that eligibility to registered domestic partners.
Dependents, however, cannot enroll and receive healthcare coverage unless the employee is enrolled as well. Currently, the Affordable Care Act mandates that group insurance plans must offer coverage to adult dependents through the age of 26.
Am I Required To Pay For The Insurance?
No, but some employers who offer coverage choose to pay the premium in full, or to pay a portion of the premium to help take the burden of paying for healthcare off their employees.
It’s also important to note that the Affordable Care Act offers some small businesses a tax credit to help offset insurance costs. It’s a win-win for both the employees, who often save money when on a group insurance plan, and for employers, who can save costs as well from the tax credit.
To qualify for the tax credit, the IRS states you must:
Have fewer than 25 full-time equivalent employees
Pay average wages of less than $53,000 a year per full-time employee (in 2017 - each year, there is a new inflation-adjusted pay requirement, so check at the beginning of each new year for updated figures)
Offer a qualified health plan through a Small Business Health Options Program Marketplace (or qualify for an exception)
Pay at least 50 percent of the cost of employee-only health care coverage for each worker
The tax credit is available for two consecutive taxable years, and covers up to 50 percent of premium expenses.
What’s My Bottom Line?
Offering healthcare coverage is important for any business to retain and attract the best employees. While small businesses who employ fewer than 50 are not required to offer health benefits, if you decide to provide health insurance coverage, there are some requirements you must follow.
Speaking with a trusted broker or agent can help clarify any questions you may have about your options, insurance companies and premium costs.
Our article, The Best Health Insurance Brokers For Small Business, explains more about the benefits brokers can provide you and your employees, so that you can focus on the day-to-day operations of your business.
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