Small Business Health Insurance Requirements

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A business with 50 or fewer full-time equivalent employees is not required to offer health insurance under the Affordable Care Act. As of this writing, however, the government encourages them to do so by offering tax credits to help cover premium costs.

Tax Credits

If you have fewer than 25 FTE employees who earn an average of less than $50,000 a year, you can apply for a tax credit that may cover up to half your premium contribution. The smaller the business, the bigger the credit. The highest credits go to businesses with 10 or fewer FTE employees who earn an average of $25,000 or less per year. Tax-exempt companies may receive a payroll tax credit of up to 35 percent.

To qualify for tax credits, the business must pay at least half the premium costs and must buy the insurance through the Small Business Health Options Program -- often known as SHOP.

SHOP Coverage

SHOP is the small business equivalent of Healthcare.gov for individuals. To use it:

  • Your business must employ 50 or fewer FTE employees. That number is due to rise to 100 by 2016. 
  • You must have at least one employee who is not your spouse.
  • You must offer coverage to all full-time employees -- generally, those who average at least 30 hours of work per week. 
  • In most states, at least 70 percent of your employees must enroll.
  • You must choose coverage through the state in which your primary business address is located -- or a state where you have a primary work site for at least one FTE employee. 

Your choice of state affects your choices for health insurance. The plan participation rate is waived in many states if you apply for SHOP coverage between November 15 and December 15 of any year -- but then, Tennessee requires a rate of only 50 percent. And while the ACA doesn't require dependent coverage, state regulations vary. So can insurance options.

One Plan or One Level

You can choose a specific health plan for all employees. Alternatively, in some states you can choose a coverage level and let each employee pick a plan within that level. In midtown New York City, for example, at least one plan at every level offers acupuncture. Levels reflect the estimated percentage of total costs the enrollee pays. At the Bronze level, enrollees pay 40 percent of their health care costs, Silver, 30 percent; Gold, 20 percent; and Platinum, 10 percent.

Multi-Site Businesses

If you have a multiple business locations within one state, you make one choice of health plan options; if you have multiple businesses within one state, you need a health plan option for each business.

If you have operations in several states, you can choose one insurer's plan if it is offered in all those states, or you can choose different insurance offerings in each state. In the former case, the participation rate is based on all employees put together; in the latter, it's based on the number of employees within each state.

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