With all the recent changes to healthcare laws and requirements for health insurance, it’s no wonder small businesses are unsure of how to navigate the new system. The Affordable Care Act has expanded from a premium benefit offered only by high-profile employers to coverage for a wider number of Americans. And with that expansion, several questions arise.
If you’re a small business owner, you probably have questions about legal compliance and the costs associated with providing coverage. You might even be questioning the value of providing health insurance to your full-time employees.
Before you weigh the pros and cons, use the information below to clarify these issues and understand the requirements for health insurance as they relate to your small business.
Requirements for Health Insurance
Certain conditions for health insurance can affect your business. Make sure you know what regulations you need to follow before you make a decision about providing health insurance for your employees.
When am I required to provide health insurance for my employees?
If you own a business with more than 50 full time and/or full time equivalent (FTE) employees you will be considered an Applicable Large Employer (ALE), you are required to offer a health coverage plan. Organizations made up of smaller companies that go over the 50 total full-time and/or FTE count are included in this requirement, too.
Are some businesses exempt from providing health insurance?
The short answer is yes, but it depends on the size of your company. Business owners with less than 50 employees aren’t required to provide an insurance plan. That said, your employees are still required to get health insurance. As a solution, benefits exchanges provide business solutions and options for small businesses.
What is the Employer Shared Responsibility (ESR) provision and am I required to make an ESR payment?
Also known as “pay or play” provisions, ESR stipulates that employers with over 50 full time and/or full time equivalent (FTE) employees either offer affordable health coverage to all workers or face one of two penalties. In 2016, if no insurance is offered, then the penalty is $ 2160 per FT employee (minus first 30). The second one is if the employer offers insurance but it is either not affordable (<9.66% of income in 2016) or does not meet the minimum value, the employer has to pay the lesser of $ 3240 per FT employee receiving a subsidy or $ 2160. For more details on the circumstances that would require you to make the ESR payment, check out our blog on “pay or play” provisions.
What does a company plan have to cover?
Every employer-sponsored plan must provide what is known as a minimum value to 95% of their FT employees, or at least 60 percent of the total permitted cost for benefits expected with the plan.
If my business isn’t required to offer a plan, are there any benefits to providing one?
While you might be concerned with the costs of providing healthcare, consider the potential benefits your business gains when you offer healthcare to your employees. Companies that provide health insurance tell their current and prospective employees that they care for the wellbeing of their workers and families. Also, healthy employees take fewer sick days which translates into higher productivity for your business.
Al Schiebel is the president and owner of Schiebel & Associates, LLC and has been in the insurance industry since 1996. He has been assisting individuals and businesses with their employee benefits, primarily health, dental, vision and life insurance since 1998. Al is qualified to sell Life, Disability and Long Term Care to both groups and individuals and certified to sell individuals with Medicare Advantage, Medicare Drug Plans and Medicare Supplements. He is fluent in both English and Spanish and lives with his wife Julia and son, Brad, who is a senior at UGA.