If you have a small business and you want to offer health insurance to your employee, there are three important things to know.
1. You Decide Who to Cover
If you’re a small business with fewer than 50 full-time and full-time equivalent (FTE) employees, the Affordable Care Act (ACA) does not require you to offer health insurance to employees. However, many smaller businesses offer employee benefits as part of their employee recruitment and retention strategy.
Small businesses do not have to offer coverage to employees’ dependents either, although many do – again, to help attract and retain top talent.
You also do not have to offer benefits to part-time workers (those averaging less than 30 hours per week) or seasonal workers.
2. You Set Your Budget
Controlling the cost of benefits is important for every business, but it’s even more important for a small business. The good news is you get to choose how much you want to contribute to your employees’ insurance premiums. Depending on the health plan or health insurance exchange you select, you may have a choice of a fixed percentage amount (50% to 100%) or a fixed dollar amount for each employee. If an employee selects a plan that costs more than you are contributing, he or she simply pays the difference. And, at renewal, you have the option to change your contribution – giving you control over your costs for another year.
You could qualify for a Small Business Health Care Tax Credit. To take advantage of this tax credit program, all of the following must apply:
- You have no more than 25 FTE employees
- Your average employee salary is about $50,000 or less
- You pay at least 50% of the annual premium for employees’ health insurance
- You offer all full-time employees coverage through a Small Business Health Options Program (SHOP) marketplace (like Covered California)
Link here to find out if your company qualifies for SHOP coverage.
3. You Choose Your ACA Metal Tier
The ACA divides health plans into four “metal” tiers: Bronze, Silver, Gold, and Platinum. The tiers offer different levels of cost sharing between your employees and their selected health insurance plan, as shown below:
|Plan Category/Metal Tier||Insurance Pays||Insured Employee Pays|
Here’s a summary of the features of each tier:
- Lowest monthly premium
- Highest out-of-pocket costs when seeking care
- A low-cost way to protect yourself from worst-case medical scenarios, like serious sickness or injury. However, while the monthly premium will be low, employees will have to pay for most routine care on their own.
- Moderate monthly premium
- Moderate costs when seeking care
- Employees pay a lower deductible than with a Bronze plan before the Silver plan begins to pay. This is a good choice for employees willing to pay a slightly higher premium (than Bronze) to have more of their routine care covered.
- Higher monthly premium
- Lower costs when seeking care
- Works well for employees willing to pay more each month to have more costs covered when being treated. If an employee needs frequent care, a Gold plan can be a good value.
- Highest monthly premium
- Lowest costs when seeking care
- Deductibles are often lower, which means the plan starts paying earlier than other plan categories. This is often a great choice for employees needing a lot of care who are willing to pay a higher monthly premium, knowing that more of their costs are covered.
You can offer your employees access to a single ACA metal tier or multiple tiers, depending on which insurance carrier(s) or health insurance exchange you select for your group’s coverage.
Help Is Available
Offering health insurance to your employees is easier than you might expect. A health insurance or employee benefits agent can assist you in shopping for coverage and determining your benefits budget. Working with an agent is free, too. If you don’t have an agent, we can help you find one.