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Do I have to provide Health Insurance?

SMall Business

As a small business owner, you may be asking, “do I have to provide health insurance to employees?”. With all of the recent talk about repealing the Affordable Care Act, or Obamacare, or even just defunding parts of it, this is a confusing time for small business owners and health insurance. While the debates, budgets, and studies continue, the law is still in effect. Here is a fairly easy way to understand whether your business must provide insurance or not, and stay tuned for more updates as the congressional debates continue!

No business has to offer health insurance. However, the Affordable Care Act includes a mandate for certain large employers (with over 50 full time equivalent employees) to either offer qualified and affordable health benefits, or pay a tax penalty. This is commonly referred to as employer mandate, “play or pay” requirement, or employer shared responsibility.

It is important for your business to understand whether you are defined as an applicable large employer by the IRS, as the mandate and employer tax penalties only apply to your business if you are an applicable large employer. The IRS provides several wonderful articles about how you can be sure your giving the right coverage to your employees.

One of the major questions we receive when working with clients, is what does the 50 full time equivalent mean? Many employers used to only consider workers full time if they worked at least 40 hours a week. This meant that many employees who had hour restrictions were denied coverage. According to the IRS, a full time equivalent employee is; “A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee. An employer determines its number of full-time-equivalent employees for a month in the two steps that follow:

  1. Combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee, and
  2. Divide the total by 120″.

This seems fairly straightforward, but unfortunately, it is possible to forgo hiring full time employees, and instead hiring many part-time employees to save money. As such, the Affordable Care Act gives the guideline that the number of full-time employees you claim is equivalent to the number of hours you have workers working, as described above.

If you have questions about whether your business is providing the coverage that it needs to, we are here. As an expert in benefits insurance, I can personally guide you through the process of finding your number of employees, as well as piecing together how much coverage you should be providing to those employees.