Since the post-World War II era, when employer-sponsored healthcare benefits were conceived, healthcare, including the regulations surrounding employer-offered health insurance, have evolved, in some cases, drastically changing from year to year. The Affordable Care Act (ACA) plays a huge role in an employer’s responsibilities, so small business owners need to have a clear understanding of it so they can prepare their businesses for the end of the year and 2021.
If you are considered a “small employer,” which means, according to the ACA, having less than 50 full-time employees, then you are not required to offer ACA-described group health insurance coverage for employees.
What does this mean for other employers? Businesses with 50 or more full-time employees are still required, even after the now-repealed individual mandate, to provide group health insurance coverage to their employees. If they do not, they will be liable for penalties and fines at the end of the tax year. [Looking for more information on health insurance? Check out our Small Business Guide to Health Insurance.]
Even though they are not required to offer health insurance, there is a strong argument to make that small business should offer health insurance to their employees, if possible, since it is such a strong added value for employees (and their families) over the long run.
Since so many companies do offer health insurance, not doing so can put your business at a disadvantage when trying to attract highly skilled talent to your organization.
In addition to attracting quality candidates, here are six other advantages to investing in healthcare insurance for your employees:
Employers with fewer than 50 full-time employees are not required by law to offer group health insurance coverage for their employees. However, there are strong reasons why small businesses, regardless of size, should offer health insurance to their employees.
The ACA has transformed the group health insurance industry over the years – and it continues to evolve. Originally, the ACA had three main objectives:
The real goal was that all people, or many more anyway, would have access to health insurance benefits than they did before the ACA. Before the ACA, no employer was ever required to offer health insurance of any kind to employees.
The ACA includes premium tax credits and cost-sharing reductions to lower costs for lower-income employees and their covered dependents. The ACA tax credit also encourages smaller employers, who are not required to provide health insurance, to offer the benefit through SHOP. That, in turn, offers the employer tax credits that reduce the cost of an employer-sponsored benefit that employees want.
The ACA was designed to reform the private health insurance market to provide health insurance access to more employees who previously did not have access. Additionally, there is a tax credit for employers who offer health insurance benefits, which is designed to reduce the overall costs of ACA-related programs.
Small business owners who choose to offer group health insurance benefits for employees may qualify for the ACA’s small business healthcare tax credit. Small employers are not only eligible but often qualify for a higher tax credit. For example, some employers qualify for the Small Business Health Care Tax Credit that covers 50% of the costs the employer pays for its employees’ premiums (or 35% for nonprofit employers).
Enrolling in a SHOP plan is necessary for a small business or nonprofit to claim the Small Business Health Care Tax Credit. Additionally, your business will need to meet all of the following criteria:
You can also use Healthcare.gov’s Tax Credit Estimator to help assess what, if any, your small business tax credit will look like.
The tax credit is typically higher for companies with fewer than 10 employees who are paid an average of $25,000 or less. In essence, the smaller the business, the bigger the credit.
Finding out how to access this program and offering a health insurance plan to your workers requires work. However, these online resources can help you on your journey:
Smaller businesses that offer health insurance via SHOP may be eligible for tax credits of up to 50% of their portion of employee premium costs. To qualify, your company must have less than 25 full-time-equivalent employees who have an average salary of $50,000 or less. Qualifying businesses must also pay at least half of their employees’ premium costs.
Starting on November 1, 2020, businesses can enroll in a 2021 Marketplace health plan. The deadline for enrollment is December 15, 2020. Once enrolled, coverage begins on January 1, 2021.
You can find projected plans and pricing at healthcare.gov/see-plans.
Because enrollment can be complicated, it is recommended that you work with a SHOP-registered agent or broker – there is no cost for using their services. There are several reasons why you want to work with an agent or broker:
If you already have an agent or broker, you can continue working with them, as long as they are registered to sell SHOP insurance. Visit localhelp.healthcare.gov to find an agent or broker who can help. You can also get immediate help from an agent or broker by using the Help On Demand tool at Marketplace.
One final note relating to SHOP eligibility: If your business grows to 50 employees or more, after already qualifying for SHOP, your business can “renew” its eligibility under the current guidelines.
You can enroll in ACA health insurance coverage on November 1. To get 2021 coverage, you must enroll by December 15. It is recommended you use a SHOP-registered agent or broker to walk you through the selection and enrollment process.