As a small business owner, have you ever asked “does my business need to offer health insurance to my employees?”
You may be asking this because of a genuine interest in your employees or due to the Affordable Care Act (ACA). Under the ACA large employers (with 50 or more full-time equivalent employees) are required to offer minimum essential coverage.
Why is this required, and what are qualified health benefits? If you employ 50 or more FTE employees, let’s walk through these questions, along with more important facts about the ACA.
Why is this required?
The ACA was passed with the purpose to increase health insurance quality and affordability among Americans. To meet this purpose, an “employer shared responsibility” role has been placed on large employers, and its effect has helped decrease the number of uninsured Americans from 18% to 13.4% from 2013 to 2014, respectively.1
What is minimum essential coverage?
A large employer must offer each employee the ability to enroll in minimum essential coverage through an eligible employer-sponsored plan, which is any of the following:
- Any plan or coverage offered in the small or large group market within a State.
- Coverage under a grandfathered health plan.
- A qualified governmental plan.
Along with making coverage available, a large employer must make coverage “affordable”, which is:
- An employer’s coverage is considered unaffordable for any full-time employees, who enrolls in a health plan offered through an Exchange and are eligible to receive federal premium subsidies.
- If one or more full-time employees receive federal subsidies due to purchase of health insurance through an exchange in a given month, the employer must pay a monthly penalty based on the number of full-time employees who receive federal subsidies.
What if you don’t offer qualified health benefits?
Applicable large employers who fail to offer minimum essential coverage will be required to pay a penalty on their tax return. The annual per employee penalty is $2,000 (Note: the employer receives a credit of 30 full-time employees, making the penalty begin with 20 employees). The terms are explained as follows:
- The employer only pays a penalty if at least one employee enrolls in a health insurance exchange and qualifies for premium subsidies and/or other tax credits from the federal government.
- If at least one employee receives federal subsidies due to purchase of health insurance through an exchange in a given month, the employer must pay a monthly penalty based on the number of full-time employees employed during that month.
As a small business, maybe you see employee health coverage with totally new eyes. It has a definite effect should you continue to grow, seek more to reward your employees, and organize company policies.
For more information and further details about ACA, please refer to the references cited below.
- Blumenthal D, Collins Sr (2014). “Health Care Coverage Under the Affordable Care Act–A Progress Report.”. N Engl J Med 371 (3): 275–81. doi:10.1056/NEJMhpr1405667. PMID 24988300.