If you’ve been in business for a while you probably are quite familiar with and knowledgeable about options for health insurance for small business owners.
However, perhaps you’re not so well informed as you’d like to be, or you’re simply new to the business ownership world and want to understand your healthcare coverage options. With that in mind, let’s start with a high-level overview of group health insurance.
What is Group Health Insurance for Small Business Owners?
Under federal law, health insurers are required to provide small businesses with group coverage should the business choose to purchase it, regardless of the size of the organization.
A simple definition of group health insurance can be found at the Investopedia website,
“Group Insurance health plans provide coverage to a group of members, usually comprised of company employees or members of an organization. Group health members usually receive insurance at a reduced cost because the insurer’s risk is spread across a group of policyholders. There are plans such as these in both the US and Canada.”
Normally, group health insurance plans are purchased by employers and organizations to be offered to their employees or members. Group plans can only be purchased by groups and individuals cannot purchase coverage through a group plan. Most all group plans require at least 70 percent participation of a company’s employees in the plan to be valid.
It’s important to keep in mind, too, that federal law does not require that business owners offer health insurance coverage to their employees, but those with less than 50 employees can access the Small Business Health Options Program, or SHOP.
SHOP is a federal insurance exchange, created by the Patient Protection and Affordable Care Act (ACA). The Small Business Health Options Program Marketplace helps small businesses provide health coverage to their full-time employees (FTEs).
In addition, employers with less than 25 employees and who are using the Small Business Health Options Program, can also qualify for a substantial tax credit known as the Small Business Health Care Tax Credit. There are some additional stipulations for qualifying such as:
- Your average employee salary is about $50,000 per year or less
- You pay at least 50% of your full-time employees’ premium costs
- You offer SHOP coverage to all of your full-time employees.
Group health insurance does not have to be offered to dependents or to employees working fewer than 30 hours per week to qualify for the tax credit.
Small Business Group Health Insurance Requirements
In addition to having access to the SHOP exchange and possible tax credits, there are other common considerations with group health insurance.
Employers are required to pay a portion of their employee’s premiums for group plans. These monthly contributions can be as low as 50 percent and, depending on the insurance provider, this can often be either a fixed dollar amount or a percentage contribution. The upside of these employer premium contributions is that they can be 100 percent tax deductible on both state and federal income taxes.
As stated earlier, typical group plans require that 65-75 percent of eligible full-time employees must participate in the program. Employees with Medicare, military benefits, or those covered under a spouse’s group plan are considered “eligible waivers” and are not included in the employee participation percentage.
In order to be eligible for group health insurance, a company has to have between 50 or less employees. Additionally, there must be at least one W-2 employee who is not a spouse of the owner or partner.
If your company does not meet the minimum participation requirements, there are still health insurance options available.
According to a post at Gusto.com,
“You can still enroll in coverage, but there’s a limited window to buy a plan. Your business can purchase a plan from any small group insurer during an open enrollment period each fall, between November 1 and December 15. During that window, insurers have to accept small groups, regardless of the percentage of employees who enroll in the plan.
This can all get pretty tricky. The best thing to do is to work with a health insurance broker who can help you choose and roll out a plan for your team, and keep you compliant.”
Getting Group Health Insurance for Small Businesses
We explain the different types of health coverage plans and their distinctions in an earlier post that can be found here. There is no “one size fits all” health plan, especially for small businesses, so it pays to take the time to ask questions and research your options.
We can help you understand the basics of group health care insurance coverage and how an agent can help you save money. A qualified insurance agent, like JC Lewis Insurance Services can help you choose a plan that provides the benefits and coverage your employees really need.
Because of the Affordable Care Act (ACA) you can no longer be denied the right to purchase health insurance coverage because of the size of your company.
There are a number of resources to help you learn about health insurance plans in California such as the California Department of Insurance and Healthcare.gov, along with seeking out resources from a good agent like JC Lewis Insurance Services.