Allison Hutton

How Health Insurance Changes with the Size of Your Small Business

As a business owner, it’s important to understand the laws and regulations surrounding small business health insurance and their impact on you as your company changes size. Due to mandates that can change what laws are applicable to your business, it’s more crucial than ever to understand the groups that are most likely to apply to your company and employees.

More than 50 Full-Time Employees

According to the US Chamber of Commerce, “employer mandate” requires businesses that employ 50 or more full-time employees to offer health coverage to employees. It’s important to note that, under the mandate definition, full-time employees are defined as those who work 30 hours or more per week. Additionally, should you choose not to offer health insurance, your business can be fined. It’s important to keep in mind that different mandates will take effect, should your business needs change and you employ fewer than 50 employees.

Fewer than 50 Full-Time Employees

If you’re an employer with less than 50 full-time employees and choose not to offer health insurance, your business is exempt from the penalty set forth in the employer mandate. However, it’s important to understand what defines full-time employees. According to the IRS, employers need to add their total number of full-time employees for each month of the year prior to the number of full-time equivalent employees, dividing that total number by 12.

To determine the amount of full-time equivalent employees, add the number of hours worked by part-time employees in a given month and divide the total by 120, the Chamber of Commerce noted. As you can see, this can be a bit tricky and should be determined with the help of your broker or financial professional.

When Your Employee Count Changes

When your business climate changes, you might think you can simply move between the two small business health insurance groups; but that isn’t the case. The eligibility for either group is assessed based upon the number of calculated full-time employees for the previous calendar year. Therefore, a larger business that reduces its workforce could still incur penalties under the employer mandate, based on being considered a business with 50 or more full-time employees the prior year.

When situations change within your business, it’s best to be proactive. Speak with your broker or financial advisor to determine what mandates will impact you, possible penalties and the best course of action for your company and employees.

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