Learn all the requirements for getting a group health insurance plan.
Wondering what you need to qualify for small business health insurance? If you have full-time or full-time equivalent employees, it’s generally easy to qualify for small business health insurance, and you may even potentially qualify for a small business healthcare tax credit.
Continue reading to learn everything you need to qualify for small business health insurance.
How to qualify for small business health insurance
Essentially, you need to satisfy two main requirements to qualify for small business health insurance. They are:
- Having at least one qualified full time or full-time equivalent employee besides yourself
- Legally being considered a business according to your state’s regulations
The Affordable Care Act (ACA) considers a “small employer” to be a business with 1 to 50 employees, so your small business would meet that requirement by having at least qualified one employee, besides yourself or a spouse.
You can use certain forms of documentation to prove to health insurance companies that you are a business with an office or work site in your state. Examples of records that could help with your approval for small business health insurance include:
- Your articles of incorporation
- Your current business license
- Your recent full business tax return
Who is considered an employee?
As the small business owner, you need at least one employee besides yourself to qualify for small business health insurance. Specifically, your workers must be full-time or full-time equivalent employees.
Generally, as per IRS standards:
- Full-time employees are employees who work for you at least 30 hours per week.
- Full-time equivalent employees are non-full-time employees, who, in combination, are the equivalent of a full-time employee.
For small business health insurance purposes, your employees must also pass the common-law test. As per the IRS, a person who works for you would pass the common-law test if you as the small business owner have control over both:
- The work that person does
- The way they go about doing the work.
So, a worker is considered to be your small business employee if you control both their production process and the finished product of their work.
Who is not considered an employee for small business health insurance?
Who doesn’t count as a small business employee based IRS standards and the common-law test?
- Most contractors are not considered common-law employees since you usually don’t have any oversight over how they do a job.
- A spouse is not considered a small business employee for health insurance purposes.
- A sole proprietor with no employees would not qualify for small business health insurance.
Although you can choose to offer group health insurance to part-time or seasonal employees, it is important to know that they will not count toward the number of employees you need to have in order to qualify for small business health insurance.
How to qualify for a healthcare tax credit
The ACA created the healthcare tax credit to help small businesses cover the cost of group health insurance for their employees. As a small business owner, you can qualify for a healthcare tax credit if:
- You have 25 or less full-time or full-time equivalent employees.
- You pay an average annual salary less than or equal to $50,000 a year, adjusted for inflation.
- You purchase your insurance coverage via the Small Business Health Options Program (SHOP) Marketplace or through a licensed agent, like eHealth, who can enroll you in a SHOP plan.
If you are a qualified small business owner, then you may receive a healthcare tax credit of up to 50 percent of the amount that you pay (at least 50 percent) toward the monthly health insurance premiums of your employees.
Small business health insurance may offer significant tax advantages
Even if you don’t qualify for the healthcare tax credit, offering group insurance coverage can still mean potential tax advantages as well as cost savings.
As a small business owner, you are usually able to deduct 100 percent of the health insurance premiums you pay on qualifying group health plans from your business taxes, which can help you offset the costs of contributing to employee premiums. Offering group health insurance as part of a total compensation package may also result in reduced payroll taxes.
Another advantage of small business health insurance is that enrolling in a group plan often has lower costs per individual and better pricing than each employee purchasing his or her own individual or family plan. Also, through group health plans, employees may be able to pay for their share of premiums with pre-tax dollars, meaning that your employees can benefit from tax savings as well.
eHealth’s licensed health insurance agents can answer your questions about qualifying for small business health insurance and can guide you through the application process. With no broker fees and no obligation to enroll, eHealth makes it easy shop for customized group health insurance plans. Overall, eHealth can help you find affordable small business health insurance for you and your employees.
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.