Group health insurance can often be less expensive than individual plans that offer the same benefits and coverage options. However, not everyone qualifies for group coverage plans. If you have a small business, you’ll want to determine whether you qualify for group health insurance before you apply for coverage. The following information about health insurance for two employees or more will help you make informed decisions about health insurance for you and your employees.
How many employees do you need for health insurance?
To be eligible for small business health insurance, a company must have between one and 50 employees. That is considered a small business for purposes of purchasing group health insurance. If you have more than 50 employees, you’ll need to:
- apply for large group coverage
- meet group coverage reporting requirements
- meet minimum group health insurance standards
Type of employees matters
One of the employees on the group health insurance plan can be the employer or owner. However, at leastone other employee who isnotan owner must exist and enroll in the group health plan. That other employee must be someone who is:
- Not an owner or employer
- Not the spouse of an owner or employer
- Not a family member of the owner or employer
- Not a partner of the owner or employer
- Not a seasonal worker hired on an impermanent basis, even if the person works full-time during that period
- Usually not a contractor of the owner or employer (Contractors are typically not considered common-law employees because the business owner normally doesn’t oversee how the contractor does the job)
Who is considered an employee?
As the small business owner, you need at least one employee besides yourself to qualify for small business health insurance. Specifically, your workers must be full-time or full-time equivalent employees. To get group coverage, your employees must follow these guidelines set by the IRS:
- Full-time employees are employees who work for you at least 30 hours per week.
- Full-time equivalent employees are non-full-time employees, but who, in combination, are the equivalent of a full-time employee. For example, 3 employees who each work 10 hours per week are equivalent to 1 full-time employee for purposes of determining eligibility for small business group health insurance.
Your employees must also pass the common-law test. According to the IRS, a person who works for you would pass the common-law test if the small business owner has control over both:
- The work the person does
- The way the person goes about doing the work.
A worker is thus considered an employee of your small business if you direct both work process and the finished product.
Health insurance for small businesses with 2 employees: know the facts
Youcan offer group health insurance to part-time and seasonal workers if you wish.But it is important to understand, usually you must enroll at least 70 percentof your uninsured, full-time employees. If some of your employees have otherindividual or group health insurance coverage, they don’t count toward the 70percent rule.
And there is a caveat to the 70 percent rule. If you enroll in small business group health insurance from November 15 to December 15 of the year, the 70 percent participation rule does not apply. You can be approved for small business group health insurance with fewer than 70 percent of your eligible full-time at this time. Applying for small business group health insurance during this period may be advantageous if you are concerned that one or more eligible employees will refuse health insurance coverage and disqualify the company from getting small business group health insurance.
An ICHRA may be an attractive alternative to small business group health insurance
Several years ago, the federal government rolled out a new type of HRA called the individual coverage health reimbursem*nt arrangement or ICHRA. ICHRA’s are defined contribution employee benefits. ICHRAs allow all businesses, regardless of size, to reimburse employees for their health care expenses. This means your employees can choose a health insurance plan that works best for them. Then you can reimburse them tax-free for premiums and qualified health care costs up to an amount you define. There are no unpredictable costs impacting your business’ budget, as there can be with small business group health insurance. And there is no minimum number of employees who must participate in ICHRA.
Through an ICHRA, your employees receive tax benefits that are comparable to those received by employees who are enrolled in employer-sponsored health plans. This is because the reimbursable allowances you set for your employees under the ICHRA are tax-free. And your employees have the freedom to choose their own health insurance on or off the marketplace each year.
Sole proprietors need individual coverage
If you’re the only one who works at your company, you’re actually a sole proprietor and don’t qualify for small business group health insurance (even if you take a salary and consider yourself an employee). If you are sole proprietor, you will need to look into options for individual/family health insurance. This is also the case if you and your spouse are the only employees of the company. However, you may enroll your spouse as your dependent if you qualify for small business group health insurance because you have at least one other unrelated, full-time employee who participates in the plan.
Do you already have small business group health insurance?
Are you already a qualifying small business? Perhaps you purchased small business group health insurance in the past from a local broker or through your state Small Business Health Options Program (SHOP) marketplace Whether you currently have small business group health insurance or would like to have it, eHealth would like to help you explore your options and find the right plan for the right price. There is no obligation to purchase and no broker fees if you use eHealth. Feel free to use our online tools designed to help business owners and individuals find the best plan to meet their needs. Or contact one of our licensed insurance agents for assistance.
