The Affordable Care Act (ACA) mandates large employers to offer health insurance benefits to their full-time employees. If the applicable large employers fail to offer health insurance, they stand a high chance of receiving penalties from the IRS. In addition, ACA created the Small Business Health Options Program (SHOP) for companies with 50 employees and less. The act covers small companies with full-time equivalent employees (FTEs) who wish to give their employees dental and health coverage. Small companies are not legally bound to provide health care benefits. However, the benefits can be an excellent method of retaining top talent. The group health plan tends to make companies more attractive. At Kirby Employee Benefits, we have a team of experts dedicated to providing a complete understanding of the healthcare environment. We are dedicated to helping you understand the ACA requirement for your company.
How Many Employees Do You Need To Offer Health Insurance?
The structure and size of a company play an essential role in whether the health care law applies to the employer. The number of full-time employees that a company has determines a company’s size. It also includes the full-time equivalents. An applicable large employer is one whose company’s full-time employees are 50 or higher. Also, full-time equivalents are applicable. In addition, small companies with full-time employees who are less than 50 are eligible to get credits. If your small company has less than 25 full-time employees, you can get the Small Business Health Care Tax Credit to help you cover the coverage costs. Also, employers with less than 50 employees can purchase coverage via SHOP. However, the affordable care act does not apply to an employer with no employees. Large employers should also note that they must file the annual information return reporting and issue statements. The small and large employers offering group health insurance must file annual returns.
What are the ACA Requirements for Employers that Offer Group Health Insurance?
The ACA mandates that large companies must provide health insurance to their employees. Failure to adhere to the provisions will ensure that the company suffers penalties. The law requires that employers provide health insurance benefits to a minimum of 95% of their full-time employees. The benefits cover the employees’ children until they get to 26 years. However, ACA does not consider spouses to be dependents. Thus, employers do not need to cover the spouses. Small companies can participate in the Small Business Health Options Programs (SHOP). The programs consist of state-based health insurance purchasing pools. In the pools, small companies come together to purchase insurance. In addition, ACA requirements consist of the employer mandate. The employer mandate focuses on affordable coverage. As of 2020, the affordable percentage was 9.78%. The rate ensures that companies can calculate the necessary lowest coverage. IRS safe harbors determine that affordable coverage occurs when the indexed percentage is higher than the self-only coverage cost of:
- An individual’s Federal Poverty Level
- Employee monthly wages
- Employee W-2 Wages
Another essential aspect one should note in the insurance coverage is the minimum values (MV). The minimum values refer to the actuarial value that the health plan’s large population should pay on average. That is, it should cover about 60% of the incurred claims. The insurance carriers use the Department of Health and Human Services calculator to ensure it meets the MV plan. You should also note that penalties apply to those companies that do not provide a medical plan that offers at least a minimum value coverage. The penalty minus the first thirty is $2,570 for one full-time employee. Also, if the coverage provided does not attain the minimum value, then the penalty amount is $3,860 per year for one full-time employee. Kirby Employee Benefits is here to answer any inquiry on your employees’ group health insurance plan. We are experts in group health coverage and specialize in making the benefits easy and simple. Contact us for more information.