HOW GROUP MEDICAL COVERAGE VARIES WITH SMALL AND LARGE BUSINESSES

While not all businesses are required to offer medical insurance coverage to their employees, in an ideal world, every business would do so. Having said that, the reality is that very small businesses, such as those with less than 10 employees, for example, may be hard-pressed to provide those benefits.

However, under the Affordable Care Act (ACA), enterprises referred to as applicable large employers (ALEs) – those businesses with 50 or more full-time equivalent employees (FTEs) – are required to offer affordable health benefits that meet minimum essential coverage (MEC) or be subject to a penalty.

But smaller businesses aren’t under such obligations.

In fact, according to Covered California,

“Small business owners with fewer than 50 full-time employees are not required to offer health care coverage to their employees. However, you should know that if a small business with fewer than 50 full-time employees does offer coverage, then that coverage must comply with the requirements of the ACA.”

California, unlike most states, also has a category for businesses have at least one but no more than 100 eligible employees and meet certain contribution and participation requirements. These businesses can potentially qualify for what is known as Covered California for Small Business.

Those businesses in California with more than 100 full-time equivalent employees are considered Large Group Employers.

WHAT ARE THE DIFFERENCES BETWEEN LARGE EMPLOYER AND SMALL EMPLOYER GROUP COVERAGE

One of the major distinctions between the group coverage offered for large employers and those for small employers is the pricing for monthly premiums.

As one industry source website points out,

“Small Group premiums are set by the insurer and are non-negotiable. They are what used to be described as book rates or shelf rates – because brokers looked them up in large binders on their bookshelf. While the Affordable Care Act (ACA) does mandate that health plans with like benefits be priced similarly for Small Groups, premiums for larger groups are negotiated for each group specifically.”

Another significant difference is the requirement of offering Essential Health Benefits, or EHBs.

These are required under the ACA. EHBs include ten categories of health services:

ambulatory patient services (outpatient care without admission to a hospital)
emergency services
hospitalization (like surgery and overnight stays)
pregnancy, maternity, and newborn care
mental health and substance use disorder services
prescription drugs
rehabilitative and habilitative services and devices
lab services
preventive and wellness services
and pediatric services (including oral and vision care)

However, large employer group plans are not required to cover EHBs, although some do. And any health plan that does cover EHBs must cover these benefits without annual limits or lifetime maximums.

For small employers, on the other hand, the Affordable Care Act requires non-grandfathered health plans in the individual and small group markets to cover essential health benefits (EHB).

SMALL BUSINESSES HAVE ASSISTANCE WITH GROUP COVERAGE SHOPPING

On the plus side, beginning in 2014, small businesses have been able to participate in small business health options programs or SHOP exchanges.

According to HealthCare.gov,

“The Small Business Health Options Program (SHOP) is for small employers who want to provide health and/or dental insurance to their employees — affordably, flexibly, and conveniently. To purchase SHOP insurance, your business or non-profit organization generally must have 1 to 50 employees… If eligible, you don’t have to wait for an Open Enrollment Period. You can start offering SHOP coverage to your employees any time of year.”

In addition, many small businesses that provide their employee’s healthcare coverage through Covered California for Small Business may be eligible for tax credits if:

They have fewer than 25 FTE employees for the tax year.
The average annual wages paid are less than $50,000 per employee and,
The employer pays at least 50% of the employee’s premium cost.

[h2] SMALL OR LARGE, EMPLOYERS CAN AND SHOULD OFFER GROUP MEDICAL COVERAGE

Even for those smaller employers who are not legally mandated to offer their workers affordable health insurance, it’s generally a good move.

Employers with more than 50 workers must offer health insurance that is affordable and provides minimum value to 95 percent of their full-time employees and their children up to the end of the month in which they turn age 26, or be subject to penalties, according to the ACA.

This is known as the employer mandate.

However, some employers make the choice to forgo offering group health coverage and opt to pay a penalty tax, commonly referred to as the “pay-or-play” provision. This can be costly. In 2022, the tax is $2,750 per full-time employee minus the first 30 employees.

So, if an employer with 100 employees does not offer health insurance to its full-time employees and their dependents, and if at least one full-time employee buys tax-subsidized health insurance through the marketplace exchange, that employer’s penalty in 2022 will be $192,500 (100 – 30 × $2,750).

On the other hand, offering group health coverage, regardless of the size of your business, can be a major benefit for attracting new employees and a persuasive factor in worker loyalty.

PROVIDING YOUR EMPLOYEES WITH AFFORDABLE HEALTH INSURANCE BENEFITS

At J.C. Lewis Insurance we want to be your group medical insurance partner and we offer quality health insurance plans only from the leading health insurance carriers licensed to do business in the states that we operate in.

We are a family owned and operated health insurance agency located in Sonoma County, California. As specialists in finding and managing medical insurance plans for large and small businesses, and we are licensed and certified by each insurance carrier we represent.

When you’re shopping for medical insurance for you and your employees you are likely to have several questions and concerns. And that’s a good thing as we welcome your questions about health coverage insurance. You can be confident that JC Lewis Insurance Services will help you find the right solution.

J.C. Lewis – the right choice for helping you make the right decision for your health coverage needs.