Figuring Out Coverage Obligations for Temps Can Be Tricky
California companies that hire temporary employees or use staffing agencies to do so often ask us whether those temporary employees are eligible for health benefits. The answer to that question proves simple: yes, companies can offer temps the same coverage they provide to their full-time or part-time employees. The trickier question is whether they must make their temporary employees eligible for health benefits.
Whether a California employer has an obligation to offer health insurance benefits to temporary employees largely depends on whether they have a similar duty to provide coverage for full-time employees. And that depends on how many full time or “full-time equivalent” (FTE) employees are on the payroll
Less Than 50 Full-Time Employees? No Requirement to Provide Coverage
If your business has less than 50 full-time or FTE employees, it has no legal obligation under the ACA or any other law to offer or provide group health insurance to any employees, full-time, part-time, or temporary.
For purposes of the ACA, a full-time employee qualifies as one who works 30 hours or more each week or 130 hours each calendar month, including vacation and paid leave time.
Companies with less than 50 full-time employees may still need to provide coverage if they have 50 or more full-time equivalent employees. The ACA defines FTE as “a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.”
That may sound confusing, but the law provides guidance on how to calculate your number of full-time-equivalent employees:
- Combine the number of work hours of all non-full-time employees for each month but do not include anything more than 120 hours of service per employee, and
- Divide that total by 120.
The IRS has some handy guidance that can help explain in greater detail whether your company falls below or above the 50 employee limit and whether you, therefore, have an obligation to offer coverage.
If an Employer Has 50+ Full-Time Employees, They Must Offer Coverage to any Full-Time or FTE Temp Employees
If your company has 50 or more full-time or FTE employees, the law considers it an “applicable large employer” (ALE) that must offer an ACA-compliant group health insurance plan to at least 95% of its full-time employees.
As noted, the ACA defines “full-time” as an employee hired with the intent to work 30 or more hours per week, including any temp workers who meet or exceed the 30 hours per week threshold. If a temp employee in California works less than 30 hours a week, the employer is not obligated to offer coverage, just as they do not need to provide health benefits to regular part-time employees.
However, if you only expect a temporary employee to work at the company for less than 90 days, your company is not required to offer them health benefits.
Two Ways to Meet Coverage Obligations If Using a Temp Agency
ALE’s that hire temporary workers through a staffing agency have two ways they can meet the requirement to offer full-time temps coverage:
- The employer can offer the employee the opportunity to participate in their existing group health insurance plan; or
- The employer can pay an additional fee to the staffing agency for each employee that elects coverage offered through the staffing agency.
Are Your Temporary Employees Eligible for Health Benefits? Speak With Preferred Insurance Today to Learn More
Helping California small business owners navigate the complicated landscape of health insurance coverage, including their obligations to temporary workers and part-time employees, is just one way that Preferred Insurance helps them ensure their workers stay healthy and covered.
As an experienced California small business and individual health insurance broker, we can answer your questions and provide practical, affordable coverage options for businesses of all kinds.
Call Preferred Insurance to schedule a free consultation about your small business or individual health insurance needs.