We all understand that health insurance is vital, but – for many small business owners – it can be an intimidating task to take on for their employees.
Small-Group Health Insurance Essentials
One of the first questions that is often asked is, “What is small group health insurance?”
Under the Affordable Care Act (ACA), health insurance providers must offer group coverage to small businesses if a business chooses to purchase it, regardless of the size of that business.
The ACA has three, broad designations for businesses based on size. According to a memo report by the National Conference of State Legislatures, the ACA defines business size by the following:
Large Businesses
Those with 100 or more full-time or full-time equivalent (FTE) employees. These businesses, which make up about 2 percent of businesses nationally, must offer health insurance or coverage.
Medium-sized Businesses
Companies with 50 to 99 FTE employees, which includes about 7 percent of the private workforce. These employers have been required to offer health insurance or coverage since January 1, 2016.
Small Businesses
Organizations that have fewer than 50 employees (about 96 percent of all employers). Under the Affordable Care Act, employers with fewer than 50 employees are not required to offer or provide coverage or fill out detailed forms under the Affordable Care Act.
However, in California, a “small business” is considered one with up to 100 employees. A guide from Covered California, the state’s health exchange, explains,
“California recently expanded the group size definition of a small business to include any business with at least one but no more than 100 full-time equivalent employees. Historically, small group size in the health insurance industry was determined for employers that had up to 50 full-time employees. With the recent expansion, employers with 51-100 FTE employees are now also considered small-group. Covered California for Small Business changed its eligibility requirements to align with the state expansion of small-group, which means that employers with up to 100 FTE employees may be eligible to enroll in the program.”
This is important to keep in mind when researching small group health insurance. And, while small group health insurance remains an option, businesses of this size in California would do well to offer coverage anyway. As we’ve noted previously, quality healthcare coverage benefits can be a winning asset for any business competing in today’s job market.
Small-Group Health Insurance: Things to Know
In California, small group health insurance plans are purchased by the employer or the organization and offered to their employees or members.
Most California medical insurance providers require that at least 60 to 70 percent of a business’s eligible employees enroll in the medical insurance plan offered by the employer. This ensures that the majority of the employees, both healthy and unhealthy, enroll in the small group medical insurance plan.
In the insurance industry, this prevents what is known as “adverse selection,” a scenario where people more who are highly prone to using medical care sign up for coverage. Adverse selection causes the premium to increase for everyone, so the majority participation requirement helps prevent this problem.
Small businesses offering health insurance coverage to their employees must offer plans that have ten minimum essential benefits. 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
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). For California employers, this is done through Covered California for Small Business (CCSB).
There is an employee participation rate requirement that at least 70% of your eligible employees must enroll with Covered California for Small Business (CCSB) when offering coverage through CCSB.
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.
Small-Group Health Insurance in California
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’ve discussed the different types of health coverage plans and their distinctions in a previous blog post, which is a good place to start.
At JC Lewis Insurance Services, 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.