Do Small Businesses Have to Offer Health Insurance?

The short, simple answer is, “no.” But as always with health insurance, the short, simple answer is not quite the right one. For one thing, it depends on what we mean by “small.”

Under the Affordable Care Act (ACA, “Obamacare”), businesses with the equivalent of 50 or more full-time employees have to offer health care to their employees or pay a penalty. The choice is up to their management.

How are Full-time Equivalent Employees Determined?

The law contains provisions to keep employers who hire surges of seasonal workers from having to offer them health insurance. It considers employees who work 30 or more hours per week full-time and to offer a plan that covers at least 60% of anticipated expenses for 95% of its workforce. If it does not do this, the minimum penalty is $2,320 for each full-time employee after the first 30. The coverage must be affordable, which means that it costs the employee no more than 9.86% of their gross income for 2019. These requirements went into effect in January 2016. There are few more trivial details. A good short review of the requirements can be found here.

What Do I Have to Cover?

The ACA requires that your plan cover the employee and any children up to age 26. It does not require you to cover spouses, although you may choose to do so.

What’s This About One Full-time Employee Getting Obamacare?

The penalty applies as soon as one of your employees enrolls for a subsidized plan on the Obamacare exchanges. If none of your employees enroll or they enroll but do not receive a subsidy, it does not apply.

When Does the Penalty Apply?

The penalty applies if (1) insurance is not offered or (2) it does not provide minimum value or (3) it is not affordable. So even if you provide insurance, you are still subject to the penalty if the insurance does not offer minimum value or it is not affordable for your employees, as the ACA defines “minimum” and “affordable.”

What’s the Process?

If you do not offer coverage and one employee enrolls for subsidized coverage on an ACA exchange, you will be notified. At that point, you face the decision of whether to pay the penalty or offer health insurance that meets the ACA standards for minimum value and affordability. The penalty assessment comes after your file your tax return for the year in question. You have appeal rights that are specified in the law.

I Own Several Companies. Does This Apply to Each of Them?

Companies with a common owner are considered one company for ACA purposes. Essentially, this means that if the total number of employees of all companies is at least 50 full-time equivalents, all of the companies are subject to the penalties, which must be paid by them individually.

How Will I Know If I Have Been Assessed a Penalty?

The Internal Revenue Service (IRS) sends Letter 226J to employers and plan sponsors relating to compliance for any given year. You have 30 days to respond if you are found out of compliance. When a penalty is assessed, you are informed via IRS Notice 220J. This notice will inform you of the penalty, if any. The Notice will advise you of your rights of appeal.

This Looks Like It Could Be a Major Headache. What Should I Do?

Indeed, it can. The record-keeping, calculations, correspondence, and administrative duties involved will probably consume the time of at least one full-time employee. For this reason, you may want to consider outsourcing your insurance administration or compliance handling to a company that specializes in them.  Contact Health Care Insurance Company on the web or call them at (855) 401-8383.