Is a small business (less than 50 employees) required to offer health insurance?

December 21, 2013

What is considered a small business under the Health Reform Law?

The Affordable Care Act defines a small business as one with less than 50 full-time equivalent employees.



What is a full-time equivalent employee?


Generally speaking, it's a true employee of your business who works 30 or more hours per week for 120 days or more per year. Employees who work part-time can partially count toward your total number of FTEs for your business even though you do not have to offer a part-time employee benefits.



What if I'm Self-Employed?


If you are self-employed (business of one), you are not considered "an employer" under ACA. You'll be shopping for low-cost private plans, not business plans.  



Are small businesses required to offer health insurance to employees?

No, they're not. So if your business has less than 50 FTEs, there is no penalty for not offering health insurance to your employees. Penalties are only applied to large businesses (50+ employees) starting in 2015.


Small Business Tax Credit

Some small businesses might qualify for a small business tax credit when purchasing certain plans.


To try and qualify for the tax credit, your business must:

  • have less than 25 employees (FTEs) - with the largest credit for businesses under 10

  • pay half the employee premium 

  • have an average income of less than $50,000 per year.


Our experts will help you qualify for a Small Business Tax Credit. 



Offering Small Business Health Insurance 

If a small business chooses to offer group health insurance, they will still be required to meet:


  • Participation (certain number of employees on the group plan) 

  • Contribution (certain amount an employer pays toward employee's insurance) 

  • Employee notification requirement (new under the Affordable Care Act)

  • COBRA (if applicable) rules.


Offering Individual and Family plans instead of a group plan


Since you are not penalized for not offering health insurance, you have options.


Many small businesses will choose to let employees choose their own individual or family private policy instead. That way, you don't have to worry about the small business plan administration and rules, and each employee can choose their own coverage.


Employees who qualify for tax subsidies (money government pays to your private insurance company to make your plan affordable) to lower their private health insurance premium could only apply it toward Individual or Family plans. The downside is that employees can not deduct the amount they pay toward health insurance on their personal taxes. 



Contact us for help


Call us, toll-free, at 855-505-2443 or email us today for your complimentary review and proposal. 


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