Group Health Insurance for 2 Employees

Thursday, March 28, 2024 17:24 Posted by Admin

If you run a business that has only two employees, including yourself, you may be surprised to learn that you don’t need as many employees as you originally thought to be eligible for small business group health insurance. Though, it’s beneficial to understand what the definition of a small business is in the health insurance world. It can give you some insight into whether or not you qualify for group coverage for yourself and your employee.

Continue reading to learn all there is to know about small business group health insurance and find out if your two-person company qualifies for a plan.

What is Small Business Group Health Insurance?

To understand small business group health insurance, you first need to understand that there are two main types of health insurance: group plans, and individual and family plans. As the name indicates, individual health insurance involves coverage for an individual and their family. Nearly everyone is eligible to purchase individual health insurance through a marketplace or professional broker.

Group health plans, on the other hand, are designed primarily for businesses. When purchased by a small business owner, group health insurance coverage is extended to the owner, the business’ employees, and, in many cases, their dependents. Though, small business health insurance is not available to all businesses. Your company must meet distinct criteria in order to purchase a plan.

If your business does qualify, obtaining small business group health insurance is an excellent way to boost employee morale, productivity, and help with retention.

How Group Health Insurance Works

Group health insurance is commonly offered alongside a number of valuable benefits to employees by their employer. These plans are also often called employee health insurance or corporate health insurance. When compared to individual health insurance, group plans tend to cost quite a bit less, as the insurer’s risk is distributed amongst an entire pool of people. They also benefit employers with tax reductions, making group health insurance advantageous for both employer and employee.

While individual plans are purchased by one person for themselves and their family, group health insurance is a single policy that covers all of the members of a group. These plans can only be purchased by groups and usually require at least 70% participation by group members, depending on the provider. When a business is eligible, they will choose a respective health insurance provider to cover their employees under a group health plan.

The company chooses how much they want to contribute to their employees’ premiums, with 50% being the minimum percentage in most states. Then, the employees are responsible for the remaining expenses.

Small Businesses Defined

In the health insurance world, a small business is generally defined as having at least one employee. This employee, however, cannot be the owner and must be a full-time equivalent employee or a common law employee. Common law employees are workers that work no less than 30 hours a week and are not the spouse of the small business owner. So, if your two-person small business is just you and your spouse, you most likely do not qualify for group health insurance.

However, if you have at least one full-time employee that is not yourself and not your spouse, you may be eligible to purchase group health coverage. There are also some instances that require small businesses to provide proof that they are a small business, in the form of proof of annual revenue.

Requirements for Group Health Insurance

Federal law requires that insurance companies have to provide small businesses and organizations, such as those defined above, with group health insurance no matter their size. However, this does still mean that the company needs to have at least one employee to purchase a group health plan.

In other words, if your employee count is between one and 50, you can apply for small group health insurance. But, if your company has more than 50 employees, you still qualify for group health insurance but must look into large group coverage.

While your business may qualify for group health insurance by having one employee, this employee cannot be the owner, the spouse of the owner or employer, related to the owner or employer, or a seasonal employee. The IRS also requires that this one employee by full-time, or full-time equivalent. Full-time equivalent employees

Do Small Businesses Have to Offer Health Insurance?

The Affordable Care Act (ACA) dictates that small businesses with less than 50 employees do not legally have to provide health insurance to their employees. However, this means that if your business has 50 or more employees, you are legally required to offer your employees affordable health insurance.

In order for the insurance to be considered “affordable,” the employee’s annual insurance premium cannot be over 9.87% of their annual income. If you are legally required to but choose to not offer health coverage to your employees, you could face a penalty of $2,320 for each full-time employee beyond the initial 30.

Why Provide Small Business Health Insurance?

When your business consists of just two employees, offering health insurance may not be at the top of your priority list. However, doing so can often make or break your business. With that said, consider the following reasons as to why, even if you are not legally required and assuming you are eligible, we strongly recommend purchasing small business group health insurance for your team:

1. Lower premiums. Unlike individual policies, group health plans are spread over a group of people. Since more people are paying into the policy and the risk is distributed between all the members of the group, coverage is usually more affordable and also more extensive.
2. Tax advantages. There are a number of tax benefits available to small businesses that offer group health insurance to their employees. However, you must purchase your policy via the Small Business Health Options Program Exchange (SHOP), have less than 25 full-time employees, contribute at least 50% to employee premiums, and deliver annual salaries that are less than an average of $50,000 per full-time employee. If your business meets these requirements, you could qualify for up to 50% of your contributions as a tax credit. This can help offset the overall cost of offering health insurance to your employees.
3. Boosted employee morale. It is a proven fact that businesses that offer health benefits, have happier, healthier, and higher-quality employees. The healthier your team is, the more productive they will be. After all, the last thing you want is for your employees to evade the doctor when they get sick because they don’t have health insurance. This can lead to them getting even sicker, and having to take time off of work.

Group Health Insurance for 2 Employees

If your small business consists of just two employees, you may be eligible to apply for group health insurance. Have more questions about qualification requirements and how to find the ideal solution for your business? We can help! The team at Taylor Benefits Insurance Agency specialize in group health insurance and have been assisting small businesses like yours for more than thirty years.

Contact us today and our experienced, professional brokers will help you understand your options regarding group health insurance and help you find the right plan that fits the needs of both your company and your workforce!