General

Health Insurance requirements for small Businesses

As a small business proprietor, it can be challenging to keep up with the changing guidelines and laws, particularly health insurance.

  • What are the key insurance requirements you must be aware of this year?
  • What are the benefits of providing small business health insurance?
  • What are the obligations of your employer concerning requirements on group health insurance for 2021?

Do employers have to offer small-business health insurance by 2021?

The Affordable Healthcare Act (ACA) obliges employers with at least 50 employees or full-time workers to provide affordable health insurance for their employees that provide essential benefits. A penalty the ACA has never mandated small entrepreneurs to offer health insurance for their employees. Based on the ACA guidelines for employers, owners of businesses with less than 50 full-time or equal employees can be classified as “small enterprises.” If your business falls into the definition of a small business and you are a small business, you can choose to offer health insurance for group members or not.

Do you need to offer group health insurance when you have a small-sized company?

Over half of small-business owners offer their employees health insurance plans as a group, according to a 2020 Kaiser Foundation study. Although small-scale business owners aren’t required to provide health insurance, there’s an argument that you should provide health insurance for your group employees if you can since it can be an essential benefit for your employees and your company. Think about the following benefits:

Attracting and keeping employees Offering health insurance for employees in groups could help small businesses attract more talented employees while keeping your top current employees. In a highly competitive market for talent offering health insurance coverage as part of your compensation package could be a compelling incentive to new employees to join your organization.

In order to make your business make a splash by placing your business in the 56% of small companies which offer group health insurance can help your business stand out as a responsible and responsive business leader. Employees are often enrolled in group health insurance, even if they must pay some of the costs.

A healthier workforce If employees are covered by healthcare insurance, they will be less sick and could allow your small business to increase its productivity. By accessing a wide range of medical options, your employees will be proactive in attending to their medical needs and have fewer interruptions to their work schedule.

Saving money is a common goal the tax-free benefit of health insurance offered by small-business owners will help lower employees’ tax burdens, which can provide your employees with higher take-home earnings. Additionally, you might be eligible to avail of a tax credit under an ACA’s Small Business Health Options Program (SHOP)

Overall, providing health insurance may be a good investment for your small-scale business, even if you’re not legally required to provide it.

How can businesses be eligible to receive the small-business Health insurance tax credit?

Small-scale business owners can generally qualify for the tax credit that lasts two years when the following ACA requirements are met.

  1. The small company has less than 25 Full-time equivalents (FTE) employees.
  2. Small businesses pay employees a salary that is lower than 56,000 (tax period 2020). The average salary is indexed to inflation and fluctuates each year.
  3. The small-sized business pays at least 50% of the employee’s premiums.

The small business purchases the SHOP Marketplace Plan on the Marketplace or through a partner like eHealth.

Smaller enterprises are typically in the position of being eligible for a greater tax credit for health care. For example, a company with less than 10 employees with an average wage of less than $26,000 could be eligible for the most tax-free tax credit. In the end, the health insurance tax credit can assist in making the health plan for employees more cost-effective for smaller firms while also ensuring that their plan meets ACA insurance standards. If you choose to provide a group health insurance plan to employees, you are able to determine and claim the tax credit by using IRS Form 8941.

What can employers do to cut costs on small business health insurance costs?

Small businesses can still buy group health insurance, even if they aren’t eligible for a health insurance tax credit. For instance, small-sized employers could still be able to benefit from the expense of contributing the cost of monthly employee premiums in their federal taxes as an expense of a business.

Because healthcare insurance for group employees is a company-sponsored coverage, small companies may also require employees to pay the cost of premiums for their monthly plans (typically 50% or less) out of their paychecks in order to meet employer cost-sharing requirements as well as ACA healthcare insurance regulations. Explore affordable small-business health insurance plans through eHealth to discover the most suitable solutions for your company.

You could also be able to cover some of the cost of offering group health insurance by leveraging some of the small-business incentives that are available through the American Rescue Plan Act (ARPA) of 2021. The act was passed to help businesses in the event of the coronavirus pandemic. A range of loans and grants totaling over $22 billion is allocated to aid small businesses struggling to overcome the economic consequences of the disease.

Where can businesses find small-business health insurance?

From November 1, 2021, companies can sign up for a Marketplace health insurance plan. The deadline to enroll is December 15, 2021. After enrollment, coverage starts from January 1, 2022.

If you’re a small business owner, it is easy to obtain group health insurance through eHealth. Through eHealth’s Marketplace online, it is easy to review group medical plans from various health insurance companies, including SHOP plans as well as plans that may not be available through the exchange, when you enter your employees’ numbers and the ZIP code of your company to get instant estimates for small-business health insurance.

To learn more about your insurance options, check out our low-cost small-business health insurance plans or talk to one of our certified health insurance agents now.

This article provides general information and cannot be updated following publication. Check with your tax or accounting consultant before using this article for tax or accounting advice.

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