Are you employing both full-time and part-time workers and wondering if you need to extend health insurance to everyone? In California, the answer is a straightforward “no.” There’s no state mandate forcing you to offer insurance to your part-time staff. While California does have a health coverage mandate in effect, this rule doesn’t stretch to employer obligations for part-time employees.

The number of your part-time workers could affect whether you’re subject to the federal Affordable Care Act (ACA) employer mandate. The Employer Shared Responsibility Provisions say if you have at least 50 full-time employees – including full-time equivalent employees – on average during the prior year, that makes your business an Applicable Large Employer. All ALEs must report annually to the IRS on their employee health insurance.

If you have fewer than 50 full-time employees including full-time equivalents, your business is not an ALE for the current calendar year. That means you are not subject to required reporting or the mandate to offer health insurance. But your ALE status could change from one year to the next, based on your changing workforce.

Determining Your ALE Status

To determine your annual workforce size, add the total number of full-time employees for each month (of your prior calendar year) to your full-time equivalent employees for each calendar month. Divide the total by 12.

To calculate your full-time equivalent employee count, follow these steps:

Step 1: How many part-time workers do you have? _____ (The IRS says part-time employees are those working fewer than 130 hours each month or 30 hours each week.)

Step 2: Write down the average number of hours each part-time employee works per week. _____

Step 3: Add these two numbers together and divide by 30. (Round down to the nearest whole number.) _____

Step 4: Add your full-time employee number to the number you just calculated. _____ That’s your FTE number. Your average part-time hours worked per week divided by 30 plus your full-time employees.

You can also use the FTE Calculator available online at the federal HealthCare.gov website. In addition, Gusto, a payroll and HR solutions vendor, offers advice to employers on FTE calculations. The IRS website includes other information helpful to determining your ALE status.

Coverage for Part-time Workers

Choosing to offer health insurance to your part-time employees? That’s entirely your call. There’s no federal or state law requiring health coverage for part-timers. Just like with your full-time staff, ensure the benefits criteria are applied fairly across the board for all part-time employees in similar roles. And remember, any policies you put in place should be clearly documented and accessible to everyone on your team.

If you define full-time employees as those working 40 or more hours per week, you may choose to define part-time as those employees working 30 or fewer hours per week or less than 130 hours per month for more than 120 consecutive days.

The Bureau of Labor Statistics says just 25% of employees working part-time have employer-sponsored health insurance.

Participation Is a Consideration

Some health insurers don’t extend insurance offerings to part-time employees.Some may require employees to work 20 or more hours per week to get insurance.

In addition, most carriers set a minimum participation percentage for those enrolled. In California, a DE 9C form (Quarterly Contribution Return and Report of Wages) is often required. Some carriers may waive that requirement for groups of a certain size. Others may offer a reduced participation percentage. Ask your employee benefits broker about temporary or adjusted underwriting rules that may be available.

Keep in mind, too, if you want to offer benefits to part-time workers, your group’s total participation may be affected.

If your preferred health plan is not able to offer health insurance to part-time workers, there may be other options for your employees:

• They may be eligible for coverage through a spouse’s or domestic partner’s health plan.
• They may be able to purchase coverage on their own directly through an insurer, a broker, or a third party. (LinkedIn featured an article in December 2023 about third-party market organizations.)
• Depending on their total household income, some employees may be able to secure coverage through Covered California, the state’s public exchange. A premium tax credit could reduce their cost of coverage through the state exchange.
• Some may be eligible for free or low-cost insurance coverage through Medi-Cal (the state’s Medicaid plan) or the Children’s Health Insurance Program (CHIP).

A Health Reimbursement Arrangement (HRA) allows an employer to reimburse employees for their individual health insurance premiums and qualifying out-of-pocket costs. Details are outlined in Publication 502, published by the IRS. Your broker may be able to help you with setting up an HRA.

Employer contributions to an HRA are tax deductible and not subject to payroll taxes. Reimbursements are also income-tax-free for employees, subject to minimum essential coverage (MEC) guidelines set by the IRS. PeopleKeep offers other tips in the article, Do Employers Have to Offer Health Insurance to Part-time Workers?

Discovering the Right Fit for Your Team

Chat with your broker to explore the options available in your area for groups of your size. Coverage for part-time workers may be limited or may not be available at all, depending on health plans in your region. A broker can not only educate you about your potential costs but also guide you through the doctors and hospitals in the network of health plans you’re considering. If you don’t already have a broker, we make it easy for you to search for one.