Is Your Business Too Small For Group Insurance?

Almost every small business owner works hard to make their business a quality operation. And this often includes providing their employees with as many benefits and perks as possible. 

This is due in part to the desire to be a “good employer” and to reward their employees, and also in part to the need to be sufficiently competitive in the employer market. Smart employers know that, in order to attract and retain a quality workforce, a desirable benefits package offering is a huge advantage.

However, small businesses that are truly “small” in that they have less than, say, 10 employees may wonder if they’re too small of an enterprise to obtain group health insurance.

Health Insurance is a Major Expense for Employees

Everyone from business owners to employees are familiar with the rising costs of health care over the last decade or so.

As one recent article reported,

“Insurance is one of the larger expenses for businesses and individuals alike. According to the Kaiser Family Foundation (KFF), the average annual premiums in 2021 were $7,739 for single coverage and $22,221 for family coverage.

Over the last year, the average premium for both single and family coverage increased by 4%. Even more shocking: the average family premium has increased 47% since 2011 and 22% since 2016.”

All of which adds up to a significant incentive for small businesses to offer group coverage for their valued employees.

Not All Businesses Have to Offer Health Insurance

This is an issue that is often confusing for business owners, particularly since various states have implemented their own requirements in conjunction with those of the Affordable Care Act (ACE).

However, as one source pointed out,

“Under the Affordable Care Act (ACA), applicable large employers (ALEs) 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.”

These “smaller businesses” are typically those with 49 or fewer full-time equivalent employees. 

In addition, there are additional incentives offered for employers with less than 25 workers such as a Small Business Health Care Tax Credit that can be as much as 50 percent of the costs employers pay for their employees’ premiums.

As the HealthCare.gov website explains,

“Enrolling in a Small Business Health Options Program (SHOP) plan is generally the only way for a small business or non-profit to claim the Small Business Health Care Tax Credit. To qualify for the tax credit, all of the following must apply:

You have fewer than 25 full-time equivalent (FTE) employees

Your average employee salary is about $56,000 per year or less

You pay at least 50% of your full-time employees’ premium costs

You offer SHOP coverage to all of your full-time employees. (You don’t have to offer it to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.)”

In addition, the tax credit is highest for those businesses with fewer than 10 employees who are paid an average of $27,000 or less. Essentially, the smaller the business, the larger the credit.

So, for many small businesses, it can be especially beneficial to offer group health coverage for their employees even if they have less than 10 workers. 

How Group Health Coverage for Small Business Owners Differs from Large Employers

The single most important distinguishing factor between “small group” and “large group” coverage is the number of employees. 

The small group health insurance participation requirements for your organization to qualifies for group health insurance are as follows:

Your business must comprise 2 to 49 full-time employees
Meet the minimum participation requirements set forth by the insurance company

In the case of part-time employees, it’s slightly more complex. You will need to convert each part-time employee’s hours to full-time equivalent employees based on the 30-hour threshold.  

Are you a Small Group ?

Your health “group” size, that is, the number of full-time employees, is a primary deciding factor in obtaining group health insurance for businesses.

Essentially, the size of your group is determined by the number of your full-time exempt employees, or FTEs. Typically, FTEs work 30 hours or more per week, or 120-hours per month. Part-time employees are typically counted as those who work fewer than 30 hours per week.

In addition, you must include all of the following types of employees in your calculations:

Those in sibling, subsidiary, and parent companies
All full-time, part-time, and seasonal employees

So, how can you acquire small group health insurance for your business? One source explains it this way,

“If you meet the participation requirements, you can apply for group health plans for your small or large business. You can do so by:

Directly approaching an insurance provider

Purchasing a plan through a broker

Unlike individual health plans, group health insurance doesn’t come with an open enrollment period. Meaning, you can enroll in a plan when you’re ready to sign up for one.

After enrollment, your premiums are locked in for a year. During this time, you can add or delete employees and dependents at any time, but premiums remain unchanged until the end of the plan year.

At the end of the plan year, you can either renew your existing plan or shop for a new one.”

The bottom line is that, for most small businesses with even as few as two employees, obtaining and offering small group health insurance coverage can be a benefit for both the employees and their families – and the employer!

J.C. Lewis is Your Preferred Partner for Small Group Insurance

At J.C. Lewis Insurance, our goal is to be your preferred insurance partner.

We bring more than four decades of experience and continue to offer quality health insurance plans. J.C. Lewis works only with the leading health insurance carriers licensed to do business in the states that we operate in.

As a family-owned and operated health insurance agency located in Sonoma County, California, we are also a small business and understand the particular needs and challenges business owners face. In addition to being specialists in finding and managing medical insurance plans for small businesses, we are also licensed and certified by each insurance carrier we represent.

So, whether you’re considering small group health insurance for you and your employees, or you’re simply looking to make changes to your existing plan, you will likely have several questions and concerns.

At J.C. Lewis, we always welcome your questions about health coverage insurance and you can be confident that J.C. Lewis Insurance Services will help you find the right solution.

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