As a small business, it can be confusing to navigate the changing landscape around health insurance in the United States. The Affordable Care Act (ACA) has been scaled back across the country, and this is leaving small businesses scrambling to uncover just how much insurance (if any) they need to be providing to their employees.
In general, small businesses are not required to offer group health insurance. However, that doesn’t mean they shouldn’t pay any attention to health insurance at all. In fact, there are many alternative options that are a good fit for small businesses that might not be able to afford traditional group coverage. In this guide, we’ll cover the requirements that small businesses face when it come to health insurance as well as other options for providing healthcare coverage.
Does Your Small Business Need to Offer Health Insurance?
The Affordable Care Act did away with what’s known as the individual mandate, but the employer mandate is still in effect across all state. The individual mandate was the law that requires everyone to carry health insurance or else they’d face a penalty come tax season. However, the employer mandate still requires some businesses to offer health insurance or else they’ll face their own penalty.
According to the employer mandate, health insurance is required for all applicable large employers (ALEs). What’s an applicable large employer? In 2019, this is any business that employs a combination of 50 or more full time employees during at least 6 months of the year. If you don’t meet the requirements to be an applicable large employer, you’re not bound to the employer insurance mandate.
How Much Coverage Do Large Employers Need?
If you are considered an applicable large employer, you’ll need to offer what’s known as minimum essential coverage (MEC). This is what the government has decided is required coverage to be offered at the very minimum. While you don’t have to offer plans that are ACA compliant, they need to provide for health services including:
- Lab services
- Emergency services
- Prescription drugs
- Mental health and substance abuse
- Maternity care
- Preventative care
- Hospitalization
- Coverage for preexisting conditions.
What Options Do Small Businesses Have in 2019?
Finally, let’s discuss the different coverage options small businesses have in 2019. Luckily, there are much more options than many small businesses think, and this means it’s easier and more affordable to find the right affordable insurance provider and plans. Here are some of the most popular options for small businesses.
Group Health Insurance – First, the most popular type of employer-sponsored coverage is a group health plan. These can be found through the SHOP marketplace, an online marketplace specifically for small businesses. Employees are guaranteed to find a better value from one of these group plans, though they can be most costly for smaller employers.
Group Coverage HRA – Another option is to opt for a group coverage HRA which combines a traditional group policy with a reimbursement program. The company will usually offer a high-deductible health plan in addition to a monthly allowance of tax-free money to be put towards employees’ medical expenses.
QSEHRA – Similar to a group coverage HRA, this is a new program introduced in late 2016. With a qualified small employer HRA (QSEHRA), businesses offer a monthly allowances of tax-free money for employees without a traditional health plan. Usually, employees will use this allowance to pay for their own individual plan.
Taxable Income – Finally, some businesses choose to skip the confusion of the above options and instead offer wage increases or stipends in order to help meet employees’ health needs. In this scenario, the employer simply pays employees more, however this income will be taxable for both the employer and employee.
Understanding Small Business Health Insurance
From this guide, you should have a better understanding of whether or not you need to provide health insurance for your employees. In addition, you can take steps today to ensure you’re compliant with the employer mandate.
Even if you’re not bound to provide coverage under the mandate, offering health insurance is a smart idea. Top employees today are looking for health insurance and other benefits, so this is a great way to stand out from the crowd.
