You Likely Don’t Know What You Don’t Know About Health Coverage
For most California small business owners, what they know about health coverage is far exceeded by what they don’t. That is because researching, comparing, selecting, and enrolling in group health coverage for employees is a complex and unfamiliar experience for most, if not all, small business owners.
If you own a business and want to do right by your workforce by offering them health insurance benefits that can keep them healthy, happy, and productive, understanding the basics of group health insurance in California is essential.
Providing an affordable group health insurance plan with robust benefits can help your business attract and retain top talent, reduce absenteeism and sick days, and increase employee productivity. These significant upsides to offering health coverage will save your business money in the long run.
Here are seven key things that every California small business owner should know about health coverage:
What Group Health Insurance Is
In the United States, employers who offer health insurance coverage to their employees do so through group health insurance plans. In California, health insurance companies such as Blue Shield of California, Kaiser Permanente, Aetna, Anthem Blue Cross of California, HealthNet of California, and UnitedHealthcare offer multiple group plan options specifically designed for the needs and budgets of small businesses.
A business that wants to enroll in employee group health insurance selects a plan from one of these carriers and purchases insurance for their “group” of employees and their dependents. Companies can offer coverage to only full-time employees and include part-time employees.
A company that enrolls in a group health insurance plan will typically pay the total coverage costs to the health insurance company and deduct premium contributions from the paychecks of employees who enroll.
Even The Smallest Of Small Businesses May Be Able To Purchase Employee Group Health Insurance Coverage
Employee group health insurance is probably not an option for self-employed individuals or sole proprietorships with no employees (even if they hire independent contractors occasionally). However, what you may not know about health coverage is that if your company has even one full-time employee, group health insurance is likely available so long as that employee:
- works at least 30 hours each week
- is classified as an employee and not an independent contractor
- is not your spouse or other relative, and
- is not a partner or part-owner of your business.
Your Company May Not Have To Offer Health Coverage to Employees
If your business has fewer than 50 full-time or “full-time equivalent” (FTE) employees, there is no legal requirement to offer health insurance coverage to employees. Under the Affordable Care Act (ACA), a full-time employee works 30 hours or more weekly or 130 hours every calendar month, including paid leave time and vacation days.
Companies with fewer than 50 full-time employees may still need to offer coverage if they have 50 or more full-time equivalent employees. The Internal Revenue Service has some helpful guidance that explains how to determine whether an employee qualifies as an FTE employee and whether your business falls above or below the 50-employee limit.
Companies with 50 or more full-time or FTE employees are considered “applicable large employers” as defined in the ACA. Such companies must offer an ACA-compliant plan a minimum of 95 percent of their full-time employees.
The ACA Established a Program Designed Specifically For Small Business Health Insurance Needs
A program under the ACA, the Small Business Health Options Program (SHOP) was created to address the specific needs and budgets of small businesses that want to provide health coverage to their employees, despite being under no legal obligation to do so.
Here is what you need to know about health coverage options through SHOP. Qualifying for these plans requires your small business to have the following:
- A primary business address in the same state where you’re purchasing coverage.
- At least one employee enrolling in health insurance coverage that is not the business owner, business partner, or spouse of an owner or partner.
- From 1 to 50 full-time equivalent (FTE) employees.
- Offer SHOP coverage to all full-time employees (generally those working 30 or more hours weekly).
You can enroll in SHOP health insurance plans directly through an insurance company, through Covered California (the state’s official health insurance marketplace), or with the assistance of a SHOP-registered agent or broker like Preferred Insurance.
Significant Tax Benefits For Offering Employees Health Coverage
Another thing you should know about health coverage for your employees is that enrolling in a SHOP plan can benefit your business’s bottom line. Small businesses that offer their employees health insurance coverage through a SHOP plan can receive tax credits of up to 50 percent of the premium expenses they incur during any two-year period.
Under IRS rules, an employer can generally claim the small business healthcare tax credit if it offers a SHOP health insurance plan and :
- Has fewer than 25 full-time equivalent employees;
- Pays average wages of less than $50,000 a year per full-time equivalent employee (indexed every year for inflation);
- Covers at least 50 percent of the cost of employee-only health care coverage for each employee.
In addition to the Small Business Health Care Tax Credit, California small business owners who offer healthcare to their employees can deduct 100 percent of all health insurance-related expenses as ordinary business expenses, including both federal and state taxes.
Working With a Broker Is the Best, Easiest Way To Purchase Group Health Insurance For Your Employees
As noted, you likely don’t know what you don’t know about health coverage for employees. Choosing among several competing plans without understanding the details and pros and cons of each one can be confusing and overwhelming. And most busy business owners don’t have time to educate themselves about group coverage options, the enrollment process, and plan administration.
That is why so many California business owners work with a local, experienced group health insurance broker when looking for employee coverage. A broker’s job is to evaluate and compare plans and match the best features to each company’s specific needs.
Speak With One Of Our Small Business Health Insurance Brokers Today To Learn More
Helping California business owners navigate the complicated landscape of employee group health insurance coverage is just one way that helps them ensure that their workers stay healthy and covered. As an experienced California group health insurance broker specializing in the needs of small businesses, Preferred Insurance can answer your questions and provide practical, affordable coverage options.
Call Preferred Insurance today to schedule your free consultation with one of our experienced brokers to discuss your small business health insurance needs.