Sometimes, navigating your way through the complex maze of small business ownership is akin to threading your way through a minefield with just a sharp stick to work with.
One wrong step and you could end up losing a great deal of money or find yourself in violation of laws you didn’t even know existed.
Not to paint too grim of a picture of being a business owner, but we do understand the various obstacles and pitfalls that confront owners. And California small business health insurance is a stretch of ground that we are extremely familiar with.
Important Things to Know About Small Business Health Insurance in California
For a full discussion and review of all the ins-and-outs of this topic, as well as our knowledgeable recommendations for you and your business, we encourage you to talk with us. We love to answer questions and invite you to make an appointment to ask those questions.
We’ve prefaced this section that way because, truthfully, everything you may need to know and understand regarding California Small Business Health Insurance could fill quite a few pages. That said, there are some important and crucial things we want to share with you here.
The first place to start is with a few definitions.
Eligible Small Employer
An Eligible Small Employer is defined as an employer with at least 1 but not more than 100 employees to qualify as a small business for purposes of group health insurance according to federal and state law requirements. Additionally, the law requires that a small company must have employed a non-owner, W-2 employee for at least 50 percent of the preceding calendar year or 50 percent of the preceding quarter.
A sub-group of eligible small employers are also subject to employer Shared Responsibility. This stems from the so-called “pay or play” penalty on employers with 50 or more “full-time equivalent” (FTE) employees if they do not offer “minimum essential coverage” that is affordable to their full-time employees.
All small businesses with 50 or more FTEs face a penalty if they fail to offer affordable “minimum essential coverage” to their full-time employees.
The shared responsibility refers to the fact that employers share the responsibility of paying for coverage with their employees. Employers with fewer than 50 FTEs face no penalty if they choose not to offer a group health insurance plan or if the coverage offered is considered unaffordable.
A crucial point here is that Owner-Only Businesses with no employees do not qualify as a “Small Employer.” This is due to the California law that defines a small employer as one with a bona fide employer-employee relationship and requires a small business to have at least one non-owner W-2 employee. In addition, an owner’s spouse working in the company also does not qualify the business for small group coverage.
Health insurance companies in California must offer identical plans, or Standardized Benefits, to eligible small businesses. This means that all these businesses, regardless of the number of employees, have access to the same plans. In addition, employees can select any plan an insurance company offers, and health insurance companies can provide a variety of plans for your employees.
Standardized Rates refers to the rate or monthly premium of a health insurance plan. These standardized rates are based on the exact date of birth of the employee, the date of birth for each dependent, and the location of the business. In fact, California has 19 different rating regions, many of which include multiple counties.
California state law mandates that the monthly rate paid for health insurance remains unchanged for an entire 12-month period. If an employer adds or deletes employees from the plan the amount paid will change.
Employer Contribution is based on the California health insurance companies’ requirement employers contribute at least 50 percent of the monthly cost, or premium, for an employee only. This does not include additional premium costs for dependents.
Some insurance companies allow for lower employer contribution amounts by offering a “defined contribution” arrangement.
Other Information That’s Crucial to Know
Metal Tiers are the designations used by the ACA to represent the actuarial value of health plans. All insurance companies are required to identify each of their plans by its actuarial value. To simplify this for consumers, the ACA created “metal tiers.” This allows people to know that platinum plans, for example, provide for more paid services than a gold plan, and so on through silver and bronze plans.
Employee Participation is a requirement of most California medical insurance companies that at least 60 to 70 percent of an employer’s eligible employees enroll in medical insurance. An employer can omit certain employees from the participation calculation. These employees can “waive” coverage if they obtain their health insurance coverage through a different source:
- As a dependent through a spouse or parent’s employer’s group health plan, or
- Individually through Medicare (usually for seniors age 65 or older), or
- Individually through Medicaid (MediCal in California which is for low-income people)
Eligible small employers should also note that both the IRS and the State of California give exceptional tax treatment to their employer-paid health insurance premium. Currently, the amount employers pay is treated as a fully tax-deductible business expense. In addition, an employer-sponsored health insurance plan is likewise beneficial to employees since it is non-taxable compensation on their wages.
Minimum Essentials Benefits
Minimum Essential Benefits are the 10 benefits that any health insurance coverage offered by a small business must provide. According to HealthCare.com, these include:
- Outpatient care you receive in a doctor’s office and not in the hospital
- Evaluation and treatment in the emergency room
- Inpatient care after you’ve been admitted to a hospital
- Care before and after your baby is born
- Treatment that includes psychotherapy and counseling for mental health and substance use
- Prescription medicine
- Physical and occupational therapy, speech-language pathology, psychiatric rehabilitation, and other services to help you recover from an injury, disability, or chronic condition
- Laboratory tests
- Preventive services such as screenings, counseling, and vaccinations
- Pediatric services for children under age 19 that includes dental and vision care
Your Local California Small Business Health Insurance Partners
J.C. Lewis Insurance is a long-time, family-owned firm based in Sonoma County and we are expert California small business health insurance brokers.
We only offer California small business health insurance plans from leading health insurance carriers that are licensed to do business in California.
Along with the fact that we are experienced, professional, and local brokers, we are also licensed and certified by each of these insurance carriers. This allows us 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.