Businesses big and small are eligible to purchase group health insurance. However, the rates tend to be more favorable for larger companies based on the number of participants. Still, group health insurance is still a nice benefit to offer employees.
A large group health insurance policy pools the premiums and risks associated with an insurance policy over a group of participants. These policies are commonly purchased by companies and offered to their employees as a benefit.
There are two, fairly easy to meet, requirements for purchasing a group health plan. First, your company must be registered as a legal entity where you do business. Second, your business must have at least one qualified full-time or full-time-equivalent (FTE) employee other than a spouse.
This means that a sole-proprietorship or family business without any outside employees may not qualify for a group health insurance plan. However, there are plenty of options available on the marketplace for individual insurance plans for these individuals.
What is considered full-time? The internal revenue service (IRS) considers one FTE equivalent to 30 hours per week. This could be one employee who works 30 or more hours every week or two or more employees whose combined hours equal 30 or more hours per week.
In addition to these basic requirements, some states have additional hoops to jump through like a minimum participation requirement. The average minimum participation rate is at least 70% of eligible employees. However, states like Iowa, Kentucky, Tennessee, Texas, and New Jersey, among others require a 75% participation rate.
2010 legislation known as the Affordable Care Act or Obamacare requires employers with 50 or more employees to offer group health insurance to their employees. However, that doesn’t cover everyone—part-time employees, those employed in small businesses with less than 50 employees, and others who do not participate in the workforce must find insurance coverage through other means. Despite that, ACA expanded coverage for private insurance across America.
Many small businesses have found the requirements of ACA burdensome. Employers are typically required to pay at least 50% of the premiums for group plan participants—a cost that is significantly higher for small business group health insurance plans. The good news is that there is tax relief available for small businesses that meet certain eligibility requirements.
For example, if a small employer may qualify for a credit if:
Small businesses, specifically those with fewer than 50 employees, struggle the most with the requirements to qualify for and maintain group health insurance. The cost is often prohibitively high and even when they can afford it, participation requirements are more challenging to meet.
For example, some companies use a health reimbursement arrangement (HRA) to subsidize the cost of purchasing individual health plans for their employees. These funds can reimburse employees for premiums paid or other out-of-pocket expenses like prescriptions and co-pays. In some cases, an HRA can be set up to meet the minimum coverage and satisfy the employer mandate. In addition to providing a workaround for minimum participation, these plans also allow small businesses to budget their costs better.
First, for many businesses, this is no longer an optional perk to attract the right employees. Any business with 50 or more full-time employees is under a federal mandate (ACA) to provide minimum health insurance coverage for full-time employees. Smaller businesses with fewer than 50 employees may not be required to offer health insurance, but it’s still a great idea. For one, you’ll be competing for talent to fill your positions with companies that do offer group health insurance.
Benefits of offering group health insurance:
It’s easier than ever before to qualify for group health insurance thanks to ACA reform. Most insurers have options for even the smallest businesses as long as you meet the basic requirements of operating a legal business with at least one full-time employee or equivalent. In 2022, group health insurance is a must-have for any employer looking to compete for top talent. Healthcare costs are rising and it’s an essential benefit that your employees need. Plus, offering health insurance makes a big statement about how much you care about the health and well-being of your employees. Qualifying for group health insurance is easy, but finding the best plans takes a little bit of work. Taylor Benefits can help.
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