Health Insurance

Do I have to provide health insurance to my employees?

It depends on the number of employees you have. Under the Affordable Care Act (ACA), you must provide health insurance to full-time employees if you have 50 or more full-time equivalent employees (FTEs). This is known as the employer mandate. If you have fewer than 50 FTEs, you aren’t required to do so.

How do I know how many FTEs I have?

The federal government defines a full-time employee as one who works at least 30 hours a week, or at least 130 hours a month. A part-timer is anyone who works less than that.

Here’s how you can calculate the number of FTEs you have:

  • Write down the average number of hours each part-time employee works.
  • Add up all the averages.
  • Divide the result by 30.
  • Round to the nearest whole number.
  • Add this to the number of full-time employees.

And voila, you get your FTE number. If it’s 50 or more, you need to provide health insurance.

What kind of health insurance do I need to provide?

Under the ACA, if you have 50 or more FTEs, the insurance you supply to your employees and their dependents must be “affordable” and provide “minimum value.” You can use employees’ Form W-2 wages, rate of pay, or the federal poverty line to determine whether a policy is affordable.

A plan provides “minimum value” if it covers at least 60 percent of the expected total cost of services. The IRS provides a minimum value calculator and other guidance.

What happens if I don’t provide coverage?

If you are a large employer but don’t offer health insurance to at least 95% of employees, you could pay a penalty. In 2018, the penalty is $2,320 per full-time employee (not including the first 30). That’s pretty steep!

You could also face penalties if the policy you offer is not affordable or doesn’t provide minimum value. Penalties come into play if one employee buys health insurance on their own and receives a federal premium subsidy.

Still not sure about your requirements? Talk to a certified broker who can help you figure out if and how you can provide health insurance for your team.

This article provides general information and shouldn’t be construed as legal, benefits, or HR advice. Benefits and insurance regulations may change over time and may vary by location and employer size. So, please consult a licensed broker or appropriately certified expert for advice specific to your business’s benefits options.