For small business owners, one of the biggest concerns regarding health insurance is whether or not they are required to offer coverage to their employees. The answer to this question can be complicated and depends on various factors. In this article, we’ll tackle the various laws and regulations that apply to small businesses to help you make the right decision about health coverage for your employees.
Should You or Should You Not Offer Health Coverage to Employees?
No federal law mandates companies to provide health insurance for their employees. However, the Affordable Care Act (ACA)—commonly known as Obamacare—has the employer shared responsibility provision, also known as the employer mandate. This provision requires ALEs or applicable large employers (those with 50 or more full-time equivalent employees) to provide health insurance to their full-time employees or face potential penalties.
What is an Applicable Large Employer?
An applicable large employer or an ALE is one that employs an average of at least 50 full-time employees during the previous year. This figure includes a combination of both full-time and part-time employees. The ACA defines a full-time employee as an employee who works an average of 30 hours or more per week.
If you have a small business with 49 or fewer employees, you are not subject to the employer shared responsibility provision and, therefore, not required to offer health insurance to your employees. However, you may still choose to do so if you wish.
What Type of Health Coverage Should I Provide?
The ACA mandates applicable large employers to offer health insurance that meets specific standards, known as minimum essential coverage (MEC). MEC must provide at least 60% actuarial value, which means it covers at least 60% of the total costs of covered benefits. The plan must also cover preventive services without cost-sharing requirements, such as deductibles, copayments, or coinsurance.
If your company is not an ALE, you are not subject to the ACA’s MEC requirements and can therefore offer any health insurance plan you wish, as long as it meets the needs of your employees. There are numerous options, such as small group health insurance, which can be purchased from an insurance provider or on the health insurance marketplace. One benefit to acquiring a plan from the Small Business Health Options Program or SHOP is your company will be eligible for the Small Business Health Care Tax Credit, which can offset some of the cost of premiums.
Other options available are non-traditional health insurance options like a health reimbursement arrangement (HRA) or a health savings account (HSA). These options allow employees to use pretax dollars to pay for qualified medical expenses.
What Is Employer Shared Responsibility Payment?
The employer shared responsibility payment is a fee that may be assessed on applicable large employers that do not offer insurance to their full-time employees or if the coverage they do offer does not provide minimum value or is unaffordable. If you’re an applicable large employer and do not offer health insurance to your full-time employees, you may be subject to penalties. The annual penalty is assessed per full-time employee. In 2020, the penalty fee was $2,570 per employee. The penalties for not adhering to 4980H(a) and 4980H(b), respectively, have increased in 2021, reaching $2,700 and $4,060.
Advantages to Offering Health Coverage to Your Employees
While there is no federal law that requires employers to offer health insurance, there are several advantages to doing so. Some of these advantages include:
1) Attracting and Retaining Quality Employees
A decade ago, health insurance was seen as a luxury. Today, it is considered a necessity. In fact, research showed that employees would consider leaving their current job for one that offered better health benefits. The Affordable Care Act has helped increase the number of people with health insurance, but there are still nearly a lot of people in the United States who do not have coverage.
Offering health coverage is not only key to attracting and retaining quality employees, but it is also the right thing to do. Health insurance is an essential part of a benefits package and should be offered to all full-time employees.
The cost of not offering health coverage can be high. First and foremost, companies that do not provide health insurance are at a competitive disadvantage when recruiting and retaining quality employees. In today’s job market, candidates have their pick of employers, and many will choose the company that offers the best benefits package.
In addition, companies that don’t offer health coverage may be subject to penalties under the Affordable Care Act. These penalties can be significant, and they will only increase over time. Finally, companies that don’t offer health coverage may find themselves on the wrong side of public opinion. In today’s polarized political climate, consumers are increasingly interested in knowing whether the companies they do business with share their values.
In today’s business world, offering health coverage is one of the best ways to help your company stand out against the competition. With so many firms vying for the attention of top talent, offering a comprehensive benefits package that includes health coverage can be a major selling point. Not only will it attract top talent to your company, but it will also help you retain your best employees.
2. Build a Healthy Workforce by offering Health Coverage
A healthy workforce is a productive workforce. You can assist your employees in staying healthy and productive by offering health coverage. Employees with access to quality health care are more likely to get regular check-ups and catch problems early. This can lead to fewer missed workdays and increased productivity. In addition, employees who have access to quality health care are more likely to stay with your company. Turnover is costly and offering health coverage can help you reduce turnover and save money in the long run.
Need Help with Health Insurance Concerns?
If you have questions about offering health coverage to your employees, we can help. We are a team of experienced professionals who are passionate about helping businesses navigate the complex world of health insurance. We can work with you to create a benefits package that meets the needs of your business and your employees. Contact us today to learn more.