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Health Insurance Requirements for Small Businesses

As a business owner, it can be challenging to keep up with changing rules and regulations, especially those related to health care.

Business Medical Insurance with Shield Insurance Agency

What are the essential insurance requirements you need to know for this year? And what are the advantages of offering small business health insurance? Keep reading to learn what your employer obligations are for group health insurance requirements in 2020.

Are employers required to offer small business health insurance in 2020?

Even with the now-repealed Individual Mandate from the Affordable Care Act (ACA), employers were never required to provide small business health insurance. According to the insurance requirements of the ACA, employers with less than 50 full-time employees are considered to be small businesses and are still not required to provide group health insurance coverage to their employees in 2020. However, businesses with 50 or more full-time employees (applicable large employers, or ALEs) are still required to provide health insurance to their workers or face penalties in 2020.

How can employers qualify for the small business health insurance tax credit?

Although it is optional for small businesses to offer group health insurance, employers may be able to benefit from the health care tax credit. A small business can usually qualify for the tax credit if it meets the following insurance requirements:

  • The small business has 25 or fewer full-time equivalent (FTE) employees.
  • Employees are paid an average salary of no greater than $54,200 (in 2019).
  • The small business pays at least 50 percent of employee premiums.
  • The small business buys a SHOP Marketplace Plan on the Marketplace, or from a partner such as Ehealth.

Smaller businesses can generally be eligible for a higher health care tax credit. For instance, a business with less than 10 employees and an average salary of less than $25,000 would qualify for the highest tax credit. Overall, the health care tax credit may help make the purchase of group health insurance more affordable for small businesses while ensuring that their coverage meets ACA insurance requirements.

How can employers save money on small business health insurance premiums?

Small businesses can still purchase group health insurance even if they do not qualify for a health care tax credit. For instance, small employers may still be able to deduct the cost of contributing to monthly employee premiums from their federal taxes as a business expense.

Since group health insurance is employer-sponsored coverage, small businesses can also ask employees to pay for a portion of monthly premiums (typically 50 percent or less) from out of their paychecks while still fulfilling employer cost-sharing requirements and ACA health insurance requirements. Browse affordable small business health insurance plans with eHealth to find the best options for your business.

What are small business health insurance requirements related to tax reporting in 2020?

There are certain tax reporting requirements for small businesses to keep in mind for 2020.

  • If your company decides to offer group health coverage after meeting insurance requirements, you must report the value of the insurance provided to each employee. This information goes on the employee’s Form W-2 using the code DD, as per IRS requirements.
  • According to the IRS, your business is required to withhold and report an additional 0.9 percent on employee compensation that is greater than $200,000, as per the ACA.
  • Your small business also must pay a fee toward funding the Patient-Centered Outcomes Research Trust Fund. You are required to report this fee through Form 720.

Why should employers offer small business health insurance?

Although in some cases, offering health insurance is beyond typical employer requirements, there are several advantages to offering a group health insurance plan to your employees.

  • Retaining and attracting employees – Providing group health insurance coverage may help your small business recruit better employees while also helping keep your best current employees. In a competitive talent market, offering health insurance as part of a compensation package may be an appealing incentive for people to join your company.
  • Helping your business stand out – According to the Bureau of Labor Statistics, only about 55 percent of companies with less than 100 workers offered medical benefits through small business health insurance. Employees frequently sign up for group plans, even when they have to pay for part of the premiums.
  • Building a healthier workforce – When employees have health insurance, they may take less sick days and could help your small business be more productive. By having access to many health care resources, your employees can proactively attend to their medical needs with fewer disruptions to their work schedule.

Overall, offering group health coverage may be a worthwhile investment for your small business, regardless of your employer’s requirements.

2018 Small Business Health Insurance Report
Source: eHealth 2018 Small Business Health Insurance Report

Where can employers find small business health insurance?

As a small business employer, you quickly can find group health insurance coverage through eHealth. With eHealth’s online marketplace, you can easily compare group medical plans from multiple health insurance companies, including plans which may not be offered on the exchange. By quickly entering your number of employees and the company’s ZIP code, you can instantly get quotes for small business health insurance.

To explore all of your insurance options, browse our affordable small business health insurance plans or speak with one of our licensed health insurance agents today.

This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.


For assistance with your small business health insurance, contact our specialist, Carlos Martinez Garcia | P: 616-777-3017 | Fax: 616-896-4601

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