Does a Member-Managed LLC Qualify for Small Business Health Insurance?
If you operate a limited-liability company and are considering making group health insurance part of your employee benefits package, familiarize yourself with the basic requirements used by most states to determine whether your corporation qualifies for a plan. The insurance industry is regulated at the state level, so minor variations in legislation exist based on your specific location, but the majority of states have adopted similar laws pertaining to small-business health insurance qualifications.
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Participation Requirements
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The majority of states maintain a minimum participation requirement for group health insurance plans. If too few of your employees choose to enroll in the program, the entire group may be deemed ineligible. Average minimum participation requirements range from 50 to 75 percent of your eligible workforce. However, those employees declining coverage because they have existing coverage through another employer or a spouse will not count against your LLC for participation calculations.
Contribution Requirements
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Many states require employers to contribute toward the cost of each employee's monthly premium. The amount of the average contribution requirement varies from 10 to 50 percent. Whatever percentage your LLC chooses to pay must remain static; it is against regulations for the company to pay a larger percentage of one employee's health insurance premiums and a smaller amount for other employees.
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Eligible Employees
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If your LLC offers group health insurance to its workers, you cannot deny or otherwise withhold participation in the plan from specific workers. All employees who meet your state's definition of an eligible employee must be permitted to enroll in the policy. An eligible employee is typically defined as one working at least 20 to 30 hours per week.
Active Workers
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The majority of states have established guidelines indicating that only active workers may participate in your LLC's health insurance plan. This rule usually applies only to the owners and officers of the corporation. Merely being an owner or corporate officer does not necessarily mean that you are eligible to enroll in the group medical benefits policy. Any silent partners, or other individuals who do not actively engage in working for the business for at least the minimum number of hours required, cannot apply for coverage. You must actually work at the business and receive monetary compensation for your efforts, otherwise you cannot participate.
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