Small Business Employers
If you own a small business, it can be tough to afford health insurance coverage for your employees. Small companies tend to pay more for insurance because they are not able to broadly spread the risk as large companies do. That’s why it’s a good idea to do your homework on health insurance rates and regulations. Here are some answers to frequently asked questions about health insurance coverage for employees:
Small Business Health Insurance Frequently Asked Questions
1. How many employees may my company have to be considered a small business?
In Pennsylvania, your company is considered a small business if it has 2-50 employees. However, beginning in 2016, your company will be considered a small business if you have 1-100 employees.
2. Are my premiums related to the health of my employees?
No. One of the changes in the Affordable Care Act is that health may not be used to determine premiums. Only age, geographic location, family size, and tobacco use may be considered. In any event, under Pennsylvania law, insurance companies may not impose large rate increases without first getting approval from the Pennsylvania Insurance Department.
3. What is Workers’ Compensation?
If an employee sustains a job injury or a work-related illness, the Workers’ Compensation Act provides for his or her medical expenses and, in the event the employee is unable to work, wage-loss compensation benefits until he or she is able to go back to work. Additionally, death benefits for work-related deaths are paid to the employee’s family.
4. What is COBRA continuation health coverage?
COBRA (The Consolidated Omnibus Budget Reconciliation Act) provides continuation of group health coverage that otherwise might be terminated. COBRA contains provisions giving certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. Employers with 20 or more employees are usually required to offer federal COBRA coverage. Find more information about COBRA here.
5. What is PA Mini-COBRA and how is it different than COBRA?
PA Mini-COBRA is modeled after COBRA, but has some important differences. COBRA lasts for 18 months, or in some cases 36 months; PA Mini-COBRA lasts only for 9 months. Federal COBRA pertains to large employer groups; PA Mini-COBRA applies to small businesses with 2-19 employees. These small employers are usually required to offer PA Mini-COBRA and to notify their employees of the availability of such coverage. Find out more about PA Mini-COBRA here.
6. Can I get tax credits for providing insurance to my employees?
Yes. The mall usiness Health Care ax redit offers small businesses with fewer than 25 employees a credit worth up to 35 percent (25 percent for non-profits) of premiums through tax year 2013. For tax years beginning in 2014, a small business with an average annual wage of less than $50,000 may be eligible for a credit worth up to 50 percent (35 percent for non-profits) for up to two consecutive years.
7. Can the insurance company refuse to sell me a health insurance plan because my employees are in poor health?
In Pennsylvania, if your business employs 2 to 50 employees, health insurance companies may not refuse to sell you a plan based on the health status of your employees. Beginning in 2016, this rule will apply to your business if you have 1-100 employees.
8. Are wellness programs a good investment?
Wellness programs can help employees stay healthier, ultimately having a positive effect on health care costs.
9. Do I have to report the cost of insurance on my employees’ W-2 forms?
Yes. Under IRS rules, employers will have to report the cost of insurance on employees’ W-2 Forms. For more information visit the IRS website.
10. Can I partner with other businesses in my area to form a larger group that may be eligible for lower rates?
In Pennsylvania, unless you are part of an association formed for a reason other than purchasing health insurance, such as a chamber of commerce, you may not partner with others to form a larger group for purchasing health insurance at large group rates.
11. Will my business have to pay an assessment to the IRS if I do not provide health insurance to my employees?
If you employ fewer than 50 employees you do not have to provide health insurance, and will not be assessed by the federal government if some of your employees purchase subsidized health insurance through an insurance exchange. If your business has more than 50 employees, you are responsible for providing health insurance. For more information, visit the IRS website.
12. If I cover employees’ dependents, am I legally obligated to retain my employees’ children on their plans after the children turn 21?
If your health insurance coverage offers coverage for dependents, then under federal law, it must allow young adults to stay on their parents’ plan until the age of 26. Under Pennsylvania law, employers have the option of keeping certain young adults on the employer’s plan up to the age of 30. Note that no law requires employers to cover their employees’ dependents.
13. When should I begin shopping for new coverage?
In order to make sure you and your new insurer have time to complete your enrollment, you are encouraged to begin shopping at least 60 days before your coverage expires.
Looking for more information to help your employees navigate health insurance? Explore these helpful tools and resources.