Frequently Asked Questions
How many employees do I need to have a plan?
You can have as few as one employee with a maximum of 100 employees to qualify as a small business plan. An "eligible" employee is one where the employer deducts and pays payroll taxes (FICA) and who works a minimum average of 30 hours per week. An "eligible" employee does not include: independent contractors (paid on a 1099 form), sole proprietors or Subchapter S corporation owners. An "owner" can enroll in the health plan if they work an average of 30 hours per week but are not included in the calculation of "eligible" employees by the health insurance companies, thus a husband and wife who work in the business do not qualify as a two person group. A company needs at least one, non-owner, W2 employee to qualify.
When can I start a plan?
If you have at least one non-owner W-2 employee in addition to the owner, partner. Additionally, the business cannot have been formed solely to provide or buy health insurance.
Do Independent Contractors or 1099 employees count?
No. Independent Contractors or 1099 employees do not count.
Can only a few employees sign up for the plan?
Normally the insurance companies will require a "participation" percentage to be eligible to establish a plan for your company. This percentage is normally 70% or higher and is designed to ensure that the majority of "eligible" employees enroll in the plan to avert what is known as "adverse selection". "Adverse selection" is where only people likely to use the plan sign up and causes the premiums to increase. Some employees can "waive" coverage if they have coverage elsewhere such as with a spouse's group health plan with their employer, Medi-care, Medic-Aid (Medi-Cal in California) and sometimes individual medical insurance.
Do I have to pay for my employees' coverage?
Most insurance companies require the employer to contribute (pay) at least 1/2 of the employee only monthly premium. Some insurance companies will allow a lesser contribution using a "defined contribution" amount. For example, the employer agrees to pay $150 per month per employee. The amount of the employer contribution is important to accomplish a high number of employees enrolling in the plan in order to eliminate any participation issues.
Can I have different plans or must all employees be on the same plan?
Yes, you can as long as all employees are treated the same. Many companies today provide an assortment of plans, choose one to use as the basis for contribution and allow employees to "buy-up" to a better plan in order to best fit their personal needs. Presuming you have the same new hire waiting period and you contribute the same dollar amount or percentage to each plan you should be good.
Do I have to offer a medical insurance plan to my employees?
No if you have less than 50 full-time equivalents. If you have 50 full-time equivalents or more the Affordable Care Act (ACA) has a Penalty if the company either 1) does not offer health insurance or 2) the health insurance offered is unaffordable to the Employees. Unaffordable means it cost the employee more than 9.61% of their W-2 wage for 2022. "Full-time Equivalent" means two part-time employees equals one full-time employee.
What is normally required to establish a plan?
The following are usually required to establish a benefit plan for your employees:
- Employer Application
- Employee Application
- Copies of any previous coverage
- Copies of payroll tax report: *start-up companies or owners not on payroll tax report may require alternate information.
- Premium payment: a check or Electronic Fund Transfer authorization for payment of the initial premium.