Are small businesses required to offer health insurance

Workforce Management

Last Updated: February 28, 2022 | Read Time: 6 min

One Minute Takeaway

• Providing health insurance can boost engagement and morale to employees
• Employer-sponsored health coverage must now not exceed 9.61% of an employee’s income if it is to satisfy ACA affordability requirements for 2022
• Employers should be aware of state laws in addition to federal laws related to requirements.

In the battle for talent, benefits matter. Even though businesses with fewer than 50 employees aren’t legally obligated to offer health insurance, can you afford to risk missing out on preferred hires because you don’t offer health care benefits? Adding health insurance can also boost engagement and morale, convincing your best people to stick around longer.

Small business owners shouldn’t have to be insurance experts. The problem is, many in charge of evaluating benefits packages are in the dark about the myriad compliance requirements surrounding health insurance coverage. If your company plans to provide health insurance for your employees, it’s important that you understand your choices and the laws around them.

Five Important Requirements to Know

1. Small businesses with fewer than 50 full-time employees don’t have to provide health insurance under the ACA.
2. Some employers with more than 50 employees (in the previously reported calendar year) may be subject to shared responsibility provisions, which means that they must make a payment to the IRS if one or more employees receives a premium tax credit for purchasing individual coverage on the Health Insurance Marketplace.
3. Employers are required to provide employees with a summary of benefits and coverage explaining health plan coverage and costs.
4. Employers must report coverage costs of an employer-sponsored group health insurance plan on their employee’s W-2.
5. Small businesses offering health insurance must offer it to all eligible employees when they become eligible coverage, and that period should not extend beyond 90 days.

5 Health Insurance Options to Consider in 2022

1. QSEHRA – A Qualified Small Employer Health Reimbursement Arrangement, pronounced Q-Sara, is a new benefits option that has been beneficial for small business…that are aware it even exists. The arrangement lets small business owners put aside a set sum of money each month for employee premiums and medical expenses. Under this program, employees are responsible for paying they own medical bills or insurance premiums, but the employer then reimburses the submitted expenses with pre-tax dollars.
2. ICHRA – An ICHRA or Individual Coverage Health Reimbursement Arrangement allows employers to provide a monthly tax-free allowance for individual health coverage expenses. This enables employees to shop for insurance outside of an employer’s group health plan or when an employer does not offer health insurance at all.
3. Traditional Group Health Insurance – This is the standard group health coverage that everyone’s familiar with. Businesses either work with an insurance company itself or use an insurance broker to purchase group health plan coverage for all of their employees.
4. Group Coverage HRA – An HRA is an employer-funded medical expense reimbursement plan. It allows a business to reimburse its employees tax-free for eligible out-of-pocket expenses and health insurance premiums. It’s most often paired with a high-deductible health plan (HDHP).
5. Association Health Plan – This is another new type of plan that allows several small businesses (those that are either in geographic proximity or in the same industry) to band together and gain the purchasing power needed to buy large group coverage.

Rule Changes for Larger Businesses in 2022

If your business employees fifty or more employees, you need to be aware of recent changes to health plan cost-sharing limits. Employer-sponsored health coverage must now not exceed 9.61% of an employee’s income if it is to satisfy ACA affordability requirements for 2022. This is down from 9.83% in 2021. Make sure this change hasn’t pushed your plan into ‘unaffordable’ territory.

State Health Insurance Laws

When it comes to compliance when offering insurance, not only do businesses with 50 or more employees need to concern themselves with federal law around health programs, but they also have to be familiar with laws of the states they operate in.

Pro Tip: familiarize yourself with your state’s Department of Insurance to remain complaint.

Paycor Can Help

If your company decides it’s ready to provide health insurance for your employees, make the task much easier. Paycor’s Benefits Administration Software is the more efficient way to get all of your people on board so you can get back to focusing on your HR strategy.

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