The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act, was signed into law by President Barack Obama on March 23, 2010.
One of the major outcomes of the law was the establishment of state insurance exchanges or health insurance marketplaces. As of 2019, 12 states and Washington DC operated their own exchanges. Other states either use the federal exchange or operate in partnership with or are supported by the federal government.
California is one of the states with its own health insurance marketplace known as Covered California.
Covered California and Small Businesses
Like individual residents of California, many small businesses can take advantage of the state’s exchange.
So, what exactly is a state health insurance marketplace?
One source describes it this way,
“A State-Based Marketplace (SBM) is a government agency offering subsidized Obamacare plans for the state, similar to Healthcare.gov but created and maintained by the individual state. SBMs assist citizens and legal residents with applying for marketplace coverage in order to comply with the Affordable Care Act (ACA). When the law was passed in 2010, each of the 50 states had to decide to either create a state-run health insurance exchange or offer enrollment through a federally-operated exchange.“
California’s SBM is Covered California and it offers small employer’s choices for offering their employees health insurance. Because employees of any sized business often want or need different styles of healthcare, Covered California for Small Business (CCSB) can provide options.
Traditionally, the two most popular carriers contracted with Covered California have been Blue Shield of California and Kaiser Permanente. In addition, CCSB currently offers HMO and PPO plans from Health Net, Oscar, and Sharp Health Plan.
Covered California for Small Business helps with finding health insurance for your employees that fits both your budget and theirs. As an employer, you determine the level of coverage you want to offer and how much you can contribute toward your employees’ health insurance premiums.
Based on those parameters, both you and your employees then select a plan that best fits your needs.
Qualifying Small Businesses for Covered California
CCSB is not available for all businesses in California and certain requirements must be met before you can apply. According to the Covered California for Small Business website,
You are eligible for Covered California for Small Business if:
- You have at least one but no more than 100 eligible employees and meet certain contribution and participation requirements.
- You have at least one employee who receives a W-2.
- If you are a sole proprietor, with no W-2-receiving employees, you may be eligible to purchase coverage through Covered California’s individual marketplace.
- The majority of your eligible employees live in California.
- You are eligible for Covered California for Small Business if you have 100 or fewer full-time-equivalent employees.
In California, it is easy to be unclear on the proper definition of a full-time-equivalent (FTE) employee.
For most purposes, according to the Society for Human Resource Management (SHRM),
“Full-time employees are those normally scheduled to work at least 30 hours per week, as determined by the company in its sole discretion. Part-time employees are those normally scheduled to work less than 30 hours per week, as determined by the company in its sole discretion.”
Keep in mind that calculating the number of actual full-time employees is your responsibility as an employer. This is important since small employers that have more than 100 FTE employees are not eligible for Covered California for Small Business.
In addition, it is also possible that not all your FTE employees may be eligible for coverage with Covered California for Small Business.
These ineligible employees include:
- Employees who work less than 20 hours per week
- Those who receive a Form 1099
- Seasonal or temporary employees
CCBS and Tax Credits
As a small business owner, if you purchase coverage through CCSB, you may also be eligible for a federal tax credit that can help offset the cost of providing health insurance.
The amount of tax credit provided is determined on a sliding scale. and t The maximum tax credit offered to a for-profit employer is 50 percent of the employer’s premium expenses. This means that the smaller your business, or the lower your annual average wage – or both – the larger your tax credit will be.
For tax-exempt employers, the maximum credit is 35 percent.
The federal tax credit only applies to two consecutive tax years and, keep in mind that small businesses must purchase their health insurance coverage through CCSB to be eligible for tax credits.
Covered California stipulates certain qualifications to be met to be eligible for tax credits such as:
1. Number of employees
The business must have less than 25 full-time equivalent employees (FTEs). Owners and immediate family members of the owner are not counted as employees when calculating the tax credit.
2. Average wage of employees
The employees must have an average annual wage of less than $54,000 per year. This limit has been adjusted for inflation since 2014.
3. Employer-paid premiums
The employer must contribute at least 50 percent of the cost of insurance coverage for each employee.
Expert Assistance for Your Covered California for Small Businesses Options
At J.C. Lewis Insurance we are here to assist you with questions and concerns around health coverage in general and Covered California in particular. You can ask us about choosing to opt out of offering dependent coverage, consolidating premium notices, and assigning reference plans to provide financial control over employer contributions.
We are here to help you in setting up your employee benefits program, so call us and speak with one of our licensed agents today.
Your Local Insurance Partners for Healthcare Coverage
J.C. Lewis Insurance is a long-time, family-owned firm based in Sonoma County and we are expert brokers. We offer California small business health insurance plans only from leading health insurance carriers that are licensed to do business in California.
Along with being experienced, professional, and local brokers, we are licensed and certified by each of these insurance carriers to offer coverage to individuals, families, and small group employers in addition to Medicare supplemental and prescription drug plans for seniors.
When you’re shopping for medical insurance plan options for your employees, or for you and your family, you are likely to have several questions and concerns. We invite you to bring us your questions about health coverage insurance and want you to know that J.C. Lewis Insurance Services will help you find the right solution.