Do i have to offer health insurance to employees

As a small business employer, you may be wondering what your health insurance obligations are, if any, to your employees. And if you are obliged to provide health insurance, or simply want to do so, what are the rules for offering health insurance to employees. 

Continue reading to learn about small business employer health insurance contribution and participation requirements.

Do employers have to offer health insurance?

The provisions of the Affordable Care Act (ACA) determine whether an employer is required to offer health insurance to employees or pay a substantial fine. In most states, small businesses with fewer than 50 full-time or full-time equivalent (FTE) employees have no legal requirement to offer health insurance unless they have agreed to do so by employment contract. Many small business owners still offer insurance to attract and retain valuable workers. 

As a small business owner if you offer medical coverage, you’ll have to meet the following rules for offering health insurance to employees.

• The health insurance coverage must be offered to all full-time employees. Typically, full-time employees are defined as those who work 30 or more hours per week on average.
• A small business has no obligation to offer health insurance to part-time employees (usually defined as employees who work less than 30 hours per week on average). However, if an employer offers insurance to at least one part-time employee, then the small business must offer group coverage to all part-time employees.

What health insurance employee contribution rules apply to small business employers?

One form of cost-sharing is premium contribution. Premium contribution refers to the employer sponsor and the employee who enrolls in the health insurance plan sharing the premium cost. Usually, the employer pays a portion of the premium and the remainder is deducted from enrolled employees’ paychecks. 

According to most state employer health insurance laws (and insurers offering small group health insurance), employers must pay at least 50 percent of each enrolled employee’s health insurance premium. The cost-share amount varies among states, so you will want to verify state health insurance law in the state where your business is located and registered.

When considering what portion of the premium to pay, you should also be aware that the ACA offers small businesses tax credits to help offset the cost of insurance. The employer must pay at least 50% of the premium to qualify for the credit.

Do employers have to offer health insurance to employee dependents?

If you offer group health insurance to your employees, you also have to allow plan-eligible employees to cover their dependents. Dependents include spouses, in some states, domestic partners, and natural and adopted children. Under the ACA, group insurance plans are required to extend coverage to dependent children through age 26, whether or not they live at home. Generally, dependents cannot enroll for coverage unless the employee has enrolled. 

Employers have no obligation to pay for premiums for dependents. Employers may contribute towards premiums for dependents, but are free to require employees to pay for the full premium cost for covered dependents.

What documents are required for an employer to offer group health insurance?

In order to meet health insurance requirements, a small business must provide copies of all relevant legal, tax, and accounting information when applying for group coverage. Employers are required to submit certain forms of documentation, including:

• Proof of business location
• Proof of business type
• Payroll documentation

This standard information is used to verify and authenticate the legitimacy of a small business, and much of it is available through a previous year’s business tax filings. Ensuring that your company provides the right documentation can help streamline the process of meeting the health insurance requirements needed to offer group coverage to your employees. To learn more about small business and group health insurance, refer to the eHealth Checklist.

Although small businesses with fewer than 50 employees are not required to offer health insurance, many do so. Most workers highly value group health coverage and appreciate the offer of group health coverage because it is typically cheaper than individual/family health coverage. There are also benefits for employers: business owners and their families may be able to enroll in a small business group health plan along with the business owner’s non-familial employees. An employer who offers group health insurance may benefit from business tax deductions to help offset some of the cost associated with offering group health insurance.

If you are a small business owner and you want to offer health insurance to your employees but you are concerned your choice of plans may be limited by budget constraints or minimum employee participation requirements imposed by insurers, you may want to consider an Individual Coverage Health Reimbursement Arrangement (ICHRA). An ICHRA allows you to reimburse employees, tax-free, for eligible out-of-pocket costs, including individual health insurance premiums, up to a maximum amount you set. Learn more about ICHRAs.

eHealth’s licensed agents can help you with other questions you may have about employer health insurance requirements and can help you find the right group health plan for your business. You can also quickly find and compare small business health insurance plans with eHealth.

This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.

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