Do I Have to Offer Health Insurance to My Employees?

Offering health insurance is a vital employee benefit that many businesses provide. However, with the constantly changing healthcare landscape and numerous regulations to follow, it can be challenging for business owners to navigate.

One of the most frequently asked questions is: “Do small businesses have to offer health insurance?” In this article, we will explore the legal requirements and options for employers when it comes to providing health insurance to their employees.

The Affordable Care Act (ACA)

The Affordable Care Act, also known as Obamacare, was enacted in 2010 to increase the availability and affordability of health insurance in the United States. The ACA is a federal law that includes regulations for both individuals and businesses. One of the key provisions of the ACA is the employer mandate.

Do Small Business Owners Have to Offer Health Insurance Under Obamacare?

What are the employer’s obligations under the ACA and are employers with less than 50 employees exempt from Obamacare?

• Employer mandate - The employer mandate requires businesses with 50 or more full-time equivalent employees (FTEs) to offer affordable health insurance to their full-time employees or face a penalty. Full-time employees are defined as those who work an average of 30 or more hours per week.

• Employer shared responsibility payment - If an employer fails to offer affordable health insurance that meets minimum essential coverage and affordability requirements, they may be subject to an employer shared responsibility payment (ESRP). The ESRP is calculated based on the number of FTEs, minus the first 30 employees, multiplied by a monthly penalty amount.

• Reporting requirements - Employers subject to the employer mandate must also report information about their health insurance offerings to the IRS and their employees. This includes providing a summary of benefits coverage, filing annual returns with the IRS and providing employees with Form 1095-C.

Exceptions to the Employer Mandate

Are you wondering if there are any exceptions to the employer mandate?

• Small business health care tax credit - Small businesses with fewer than 25 FTEs who offer health insurance may be eligible for the Small Business Health Care Tax Credit. This credit can cover up to 50% of the employer’s premium costs for up to two consecutive years.

• Waiting periods - Employers may impose a waiting period of up to 90 days before new employees are eligible for health insurance coverage.

• Seasonal workers - Seasonal workers who work less than 120 days per year are not considered full-time employees under the employer mandate.

Health Insurance Options for Employers

• Fully-insured plans - Fully-insurance plans are health insurance plans that are purchased from an insurance company. The employer pays a monthly premium, and the insurance company assumes the risk for covering the cost of healthcare services.

• Self-insured plans - Self-funded plans are health plans where the employer assumes the risk for covering the cost of healthcare services. Although the employer pays for healthcare expenses out of a self-funded pool of money, the total out of pocket expenses are capped at a pre-determined level.

• Health savings accounts (HSAs) - HSAs are tax-advantaged savings accounts that can be used to pay for healthcare expenses. Employers may offer HSAs to their employees as part of a high-deductible health plan.

Health Insurance FAQs

Q1: What is considered affordable health insurance under the ACA?

A1: Affordable coverage under the ACA means that the employee’s share of the premium for the lowest-cost plan offered by the employer does not exceed 9.12% of the employee’s household income.

Q2: Do employers with fewer than 50 employees have to offer health insurance?

A2: No, employers with fewer than 50 employees are not subject to the employer mandate. However, they may still choose to offer health insurance to their employees.

Q3: Can employers offer health insurance plans that do not meet minimum essential coverage requirements?

A3: No, employers must offer health insurance plans that meet minimum essential coverage requirements under the ACA. Failure to do so can result in penalties.

Q4: What is the penalty for not offering health insurance under the employer mandate?

A4: The penalty is calculated based on the number of full-time equivalent employees, minus the first 30 employees, multiplied by a monthly penalty amount.

Q5: Can employers offer both fully-insured and self-insured plans?

A5: Yes, employers can offer both fully-insured and self-insured plans, as well as health savings accounts to their employees. It is important to carefully consider the costs and risks associated with each option before making a decision.

Q6: Why should I offer my employees health insurance?

A6: Wolters Kluwer says offering health benefits to your employees can help you “attract and retain the most qualified employees.”

Other top advantages of offering employee health benefits include:

• Helps your company stand out from the competition

• Boosts workers productivity

• Keeps employees happy

• Increases retention rate

• Lowers absenteeism

• Can save you money at tax time

Get a Health Benefits Quote

Employers with 50 or more full-time equivalent employees are required to offer affordable health benefits that meets minimum essential coverage and affordability requirements under the ACA. Failure to do so can result in penalties and reporting requirements.

However, there are exceptions to the employer mandate, such as small business health care tax credits, waiting periods and seasonal workers. Employers also have the option of choosing between fully-insured and self-insured plans as well as offering health savings accounts to their employees.

As an employer, it is important to understand your obligations and options when it comes to offering health coverage to your employees. Contact us today to get a free quote for a self-funded group health benefits plan from Allstate.