What Are The Government’s Small Business Health Insurance Requirements?

This is a question we hear often from small business owners here in New Jersey. Group health insurance is a great benefit to offer your employees, but many business owners are concerned about the costs and whether it’s worth offering it versus allowing employees to opt for personal plans.

The answer often depends on how big your business is—a company with more than 100 employees, between 50 to 100 employees, 50 or less, or less than 25.

It also depends on how one defines “small business.” The official definition of companies with 50-99 employees is mid-sized, and is large for companies with 100 or more.

On the other hand, there are a number of companies with hundreds or thousands of employees, so a company with around 100 employees could be considered small compared to many corporations.

Health Insurance Requirements For Businesses With 100 Or More Employees

Companies with more than 100 employees face the following requirements:

• They must provide health insurance coverage for employees working full time, or 30+ hours per week, and their dependents.
• The penalty for not providing such coverage is $2,000 per employee, excluding the first 30 employees.
• The penalty for providing unaffordable coverage for a few employees, or coverage that doesn’t meet minimum value (pays for 60% of the total costs of medical services for the standard population, and which provides substantial coverage of inpatient physician and hospital services, according to healthcare.gov) is $3,000 per employee who received cost assistance.
• The IRS will provide employers with information about the fines they owe.
• The mandate covers full-time equivalent employees, not only upon full-time employees.
• Coverage is required for dependents who are age 26 or younger.
• Companies must offer the coverage, but employees are not required to accept. Individuals without insurance are also subject to penalties, however, and those who decline the coverage that meets the guidelines will be ineligible for marketplace subsidies to obtain other coverage.
• Coverage offered must be considered affordable—not more than 9.56% of an employee’s income.
• Companies have to provide a 30-day Special Enrollment Period for employees or the family members of qualifying employees who lost insurance from another source.

Health Insurance Requirements For Businesses With 50 to 100 Employees

Companies with between 50 to 100 employees face the following requirements:

• Businesses with between 50-99 employees have to provide the coverage as of January 1, 2016. The requirement was originally scheduled to begin in 2015.
• The requirements for the coverage are the same as for those for companies with 100 or more employees.
• Both companies with 50-99 employees and those with 100 or more must provide insurance that provides essential health benefits, such as maternity care and health insurance.

Health Insurance Requirements For Businesses With Less Than 50 Employees

Companies with less than 50 employees are generally not covered by the employer mandate and do not have to pay a fine if their employees receive premium tax credits in the marketplace. They can often obtain insurance through the Small Business Health Options Program (SHOP).

Companies with 50 or fewer full-time equivalent (FTE) employees may participate. The program gives small employers the chance to find higher quality insurance at a better price by providing increased purchasing power. The program also lessens the administrative complexity.

In addition, it pools the risk for small groups. Companies that offer insurance to employees through the SHOP and meet eligibility requirements might be eligible for the Small Business Tax Credit of up to 50%.

Health Insurance Requirements For Businesses With Less Than 25 Employees

Companies that have 25 or fewer employees who earn less than $50,000 each may apply for a tax credit, which pays up to half of the premium. The smaller the business, the bigger the potential subsidy could be. The biggest tax credits are paid to companies with ten or fewer employees who earn $25,000 or less per year.

Tax-exempt companies are eligible for a tax credit of as much as 35%. To be eligible, companies must may half the premium costs, or more, and buy insurance through the SHOP program.

If you have any questions about the government’s requirements for insurance for small companies, or anything else, feel free to contact us. At InsureYourCompany.com, we are familiar with the puzzling nature of obtaining business insurance for your small business, and can help point you in the right direction.