Let’s face it: Employer-provided health insurance is the gold standard of workplace benefits. However, it’s not always clear whether an employer provides healthcare and employees might ask: “Do employers have to offer health insurance?”
From a legal standpoint, there is no federal law that says companies must offer health insurance to their employees. However, employers’ health insurance requirements do apply for some businesses depending on their size. The Affordable Care Act (ACA), passed under President Barack Obama, stipulates that certain companies must provide health insurance or pay a fine.
So, when does a company have to offer health insurance, and what happens if they fail to do so?
The ACA is the law responsible for imposing penalties upon large employers that fail to offer health insurance benefits to their employees. Under the ACA, businesses of a certain size are required to offer a company health plan.
How Many Employees Before Health Insurance is Required?
How many employees do you have to have to offer health insurance? Currently, the limit is set at 50 or more full-time employees. This also includes the equivalent in part-time employees. For example, if a business employs 100 part-time employees, they would also need to offer health insurance to those employees despite not working full-time.
Penalties for failing to comply with the ACA provisions are significant and must be paid to the IRS. The penalty stood at $2,570 per employee for the year 2020. However, the penalties under 4980H(a) and 4980H(b) were raised in 2021 to $2,700 and $4,060, respectively.
Healthcare coverage must meet a basic standard and apply to both the employee and their dependents. The ACA doesn’t consider spouses, stepchildren, or foster children to be dependents, so these health plans only apply to biological or adopted dependents under the age of 26. Some general basic standards include:
- Out-of-pocket costs are currently capped at $8,550 for individuals and $17,100 for families
- No dollar limit on ten essential health benefits
- Pre-existing conditions are covered, with no waiting periods
- Dependents can remain on their parents’ plan until age 26
Small Businesses: Employer Healthcare and the Affordable Care Act
Do employers have to offer health insurance for small businesses? As discussed earlier, small businesses with fewer employees aren’t obligated to provide health insurance.
Ninety-nine percent of U.S. companies are considered small businesses, which means that a vast majority of employers don’t have to offer health coverage.
However, even larger employers with over 50 full-time employees have concluded that even with the penalties levied, it’s still cheaper to either not to offer full healthcare coverage or to invest in alternative health coverage options, such as a Health Reimbursement Arrangement (HRA).
While offering employer-provided health insurance is considered best practice, the fact is the majority of businesses aren’t required to offer this benefit.
Voluntary Health Insurance
Are employers required to provide health insurance? No, but the vast majority still do as a voluntary benefit. In fact, the Kaiser Family Foundation (KFF) reveals that 47.4% of all U.S. workers in the private sector were offered health insurance in 2019.
Many employers choose to offer health insurance as a company perk to attract better talent and encourage loyalty among employees. Whether or not a company provides health insurance is often a deciding factor for job seekers.
With many employees valuing healthcare coverage over higher pay, business owners have a strong incentive to implement company-wide benefit health plans — even when they’re not required to.
What is the Healthcare Tax Credit?
With the repeal of the Obama-era Individual Mandate for the mandatory purchase of healthcare under the 2017 Tax Cuts and Jobs Act (TCJA), many of the penalties previously levied were removed.
For businesses that do offer health insurance, they can claim the healthcare tax credit. There are certain circumstances where small businesses may qualify:
- Employing no more than 25 full-time employees
- The average salary is under $50,000
- The employer pays half of the healthcare premiums
- Plans purchased through the federal marketplace
The healthcare tax credit may be used to make premiums more affordable or saved and applied against a tax bill. Businesses with smaller workforces and lower-than-average salaries will qualify for a larger tax credit.
To Offer or Not to Offer?
Do employers have to offer health insurance? No, but in order to attract and retain top talent for your business, it’s highly recommended that you do so.
The fact is that many employers already offered health insurance long before the ACA because of how popular it was among working Americans.
Healthcare has become a requirement for many job seekers. With the current generation of workers showing that they’re more than willing to switch jobs to get the benefits they need, business owners need to carefully consider whether not offering healthcare plans is the best move for their organizations. If you want to prioritize employee health at your workplace and want to learn more about how Eden Health can deliver healthcare to your workforce, contact a member of our team.