Most small business owners know that offering health insurance to their employees provides many benefits for both their workers and business.
But, many want to know whether they have to offer health plans to their workers.
It depends - mostly on just how small your business is. And, whether you’re required to offer insurance or not, if you do offer a group plan, there are additional requirements you must follow. Not doing so can be costly for your company in the form of fines and additional penalties.
Below we’ll explore what you should know about small business health insurance coverage to ensure you meet federal and state laws.
Insurance Mandate
What’s considered a small business often is relative. If you have a couple hundred employees, you probably consider yourself a small business. But to a business of just a few employees, a company with 200 employees seems large.
The U.S. Small Business Administration says, depending on the industry, if you have as many as 500 employees, you are considered a small business. Why does it matter? Your size often determines whether you qualify for certain programs or contracts.
When it comes to health insurance, however, the Affordable Care Act requires that small businesses offer health insurance to their employees if they employ 50 or more full-time-equivalent workers. Though the ACA’s individual mandate is no longer required, the employer mandate is still in place.
Businesses with fewer than 50 do not have to offer health insurance to their employees, though even the smallest-size businesses can benefit from having group insurance.
If you’re a business that hires seasonal employees, determining how many full-time employees you have can get a little tricky. This FTE calculator will help you determine whether your staff numbers require you to offer healthcare coverage.
Coverage For All
If you offer group health coverage to your full-time employees, whether you’re required to or not, you must offer coverage to all of your full-time employees.
You cannot offer coverage to one department, for example, but not offer it to another department in your company. You also cannot pick and choose who you want to provide coverage to among your employees, even if some have medical conditions, while others have no medical conditions.
You can, however, only offer coverage to full-time employees, but not offer health insurance to part-time employees. In general, workers are considered part-time if they work fewer than 30 hours per week. If you offer coverage to one part-time employee, however, you must offer it to all part-time employees.
Dependent Coverage
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, any group policy that covers spouses must extend that eligibility to registered domestic partners.
It’s important to note that dependents cannot enroll and receive healthcare coverage unless your employee is enrolled in a policy as well. Currently, the Affordable Care Act mandates that group insurance plans offer coverage to adult dependents through the age of 26.
Paying For Coverage
There are no laws that require employers with fewer than 50 employees to pay for the premiums for their staff.
However, many companies will choose to pay for a portion of the premium to help take the burden of paying for healthcare off their employees. Some will even pay for the premiums in full, as part of benefits packages used to entice potential employees.
To help offset these insurance costs to small businesses, the Affordable Care Act offers tax credits. To qualify 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% of the cost of employee-only health care coverage for each worker
Note that the tax credit is available for two consecutive taxable years, and covers up to 50% of premium expenses.
Bottom Line
Many small business owners are aware of the struggles they face attracting and retaining top employees. Offering a health insurance package goes a long way, considering numerous surveys have shown offering a comprehensive benefits package that includes healthcare coverage is important to workers.
Whether you’re required or choose to offer health insurance, it’s important to ensure you follow all regulations required of you as a business owner.
Speaking with a trusted broker or agent who specializes in small business health insurance can help clarify any questions you have regarding what is required of you. Working with professional insurance brokers can provide several benefits for your business, since they understand the complexities of health insurance.
They also can assist you with paperwork, advocate for you when you have any issues with claims and help you through the renewal process - allowing you focus on your business and what matters to you most.
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