Nearly 50 percent of all Americans receive health insurance coverage from their employer. While this is a popular benefit that many companies may offer, as a small business owner, it may feel like more than you can handle.
Not only does providing health insurance entail additional costs, but it also requires additional manpower to manage the plan and meet regulations. All of this can leave small business owners hesitant to offer health insurance.
So, when do you have to offer health insurance to employees?
You've come to the right place! Read through this quick overview of offering health insurance to employees.
Types of Employee Healthcare Plans
Before we dive into when a company must offer healthcare, let's take a look at some of the different types of employee plans. Here's a quick guide to four of the most common plans.
Preferred Provider Organization (PPO)
This plan encourages patients to use in-network healthcare providers. When they do, they'll pay less for medical services. And, there's no requirement to get a referral to see an out-of-network specialist.
Health Maintenance Organization (HMO)
An HMO plan offers healthcare services through a defined network of providers. If a patient needs to see an out-of-network specialist, a referral is required.
Point of Service (POS)
This plan is a blend of a PPO and an HMO, in that patients pay a lower fee for in-network services. However, they will need a referral for an out-of-network specialist.
Exclusive Provider Organization (EPO)
With this plan, patients can choose any in-network doctor or specialist. However, there will be absolutely no coverage if they choose to visit an out-of-network provider.
If you decide to offer healthcare for your employees, it will likely be through one of these plans.
When Do You Have to Offer Health Insurance to Employees?
As of 2023, the Affordable Care Act (ACA) employer mandate remains in effect. This means that employers are required to offer health insurance if they employ 50 or more full-time employees.
The mandate also states that your healthcare coverage must pay for at least 60 percent of the full costs of the benefits.
Additionally, the benefits plan must be considered affordable for the employee. This means that the employee's required contribution is no more than 9.86 percent.
Showing Proof of Coverage
If your business employs more than 50 full-time employees, you must be able to provide proof of your health insurance coverage.
To do this, you will need to file forms 1094-C and 1095-C with the IRS prior to the yearly deadlines.
Make sure that your company is managing compliance and regulations to ensure you meet all aspects of the ACA employer mandate each year. Otherwise, you could face penalties.
Small Business Tax Credit
If you have fewer than 25 full-time employees and you choose to offer a healthcare plan, even though you're not mandated to do so, you may qualify for an IRS tax credit.
The credit is eligible for two consecutive years and offers up to 50 percent of premiums paid.
Become the Best Business Owner You Can Be
Now that you know the answer to the question, "When do you have to offer health insurance to employees?" you can feel confident knowing what you need to do to remain in compliance with the law.
Want to learn even more about how to run your business efficiently? Read through our latest articles on marketing, business management, insurance policies, and more.
