Small Business Employer Health Insurance Requirements

It is a challenge to cope and be flexible with the changes in rules and regulations, especially in health care. We are now facing high demands in medical care insurance. Your insurance pays for your surgical, medical prescription drugs, and dental expenses. You can use it to reimburse your spending from an illness or injury or pay directly to your health care provider.

Nowadays, business health insurance is trending in the medical care industry. It is a type of medical insurance coverage that insures employees or members of a company or organization. It typically provides health plan coverage to the members at a lower cost. The main reason for its affordability is the risk in the coverage of insurers that is spread across the plan members.  

The common questions in business health insurance are the requirements you need to prepare. How does it work for the company and its benefits to the full-time employees? And what are the advantages of getting one? We enumerate and provide the essential information that you need to know. We will also list the employer’s obligations for the group health insurance requirement.

What is the importance of small business health insurance?

The primary benefit of group plan insurance coverage is it offers low premium packages. Having a larger risk pool, it makes the plan more affordable than individual health plans. The more people enrolled in a medical insurance plan, the risks are spread across to its members, creating a group pool. This set-up balances the premiums paid by the member and the high insurance cost that the members pay. Other significant advantages of group medical insurance are its tax benefits.

  • It is tax-deductible. The money that your employer pays every month for your premium is tax-deductible. You can use it to lessen your taxes due and use it for other services.
  • The premiums that your employers pay are in pre-tax dollars.  You can use it to mitigate the cost of your taxable income.
  • If you have a small business, you can qualify for the small business health care tax credit.

Businesses and organizations are open in enrolling any time during the year for group medical insurance coverage. The plans are in the form of employer-sponsored group health insurance, and your company can also avail through professional organizations or associations.

Consulting your licensed insurance agent will help you learn and understand the coverage available for your business. You can ask for advice and look for affordable plans including the steps and processes to take for the company health insurance.

Why should the Employers Need Small business health Insurance

Offering a health plan is not a typical employer requirement. But, there are advantages in providing group health insurance to your employees. Below are the following examples of why you should give medical care insurance to your employees.

  • Retaining and attracting employees. You can recruit employees by providing group insurance coverage. It will also assist and help you in keeping your current employees. Looking for talent in a competitive market is difficult. If you have a health plan as an incentive, it will attract more talent to join your company.
  • Making your Business Stand Out. The data in the Bureau of Labor and Statistics states that only 55 percent of companies offer medical benefits through small business health coverage. Employees sign up for group plans because they only pay a portion of their health premiums.
  • Creating a Healthier Workforce. Providing health insurance to your employees will make your business productive. They may take fewer sick days and devote their time to working in your company. Having access to health care resources can attend to the medical needs of your employees. You proactively manage them and lessen the work disruption.

Overall, providing a group health coverage is worth the risk investment for your small business. It goes beyond your employer’s requirements.

How group Insurance works

Group health insurance plans provide businesses and organizations medical coverage for their employees or members. It is offered in groups and not for individuals. The insurance plans differ because of the variations in health insurance for companies, costs, types of plans, and plan specifications. Moreover, they share the following characteristics.

  • There is a 70 percent participation rate requirement in group medical insurance plans.
  • As members of a group, you are given a choice in enrolling or declining health coverage.
  • You can add your family members or dependents to the group plans at an additional cost.

Enrolling in a group health insurance plan requires at least one full-time or full-time equivalent employee as a business requirement. The Affordable Care Act states that small businesses with less than 50 full-time employees or full-time equivalent are not required to offer health insurance. Otherwise, if you have more than 50 full-time employees, you are required to provide group medical insurance in the workforce.

Are Employers Required to Offer Small Business Health Insurance

The individual mandate from the Affordable Care Act (ACA) does not require employers to provide small business health insurance. The Affordable Care Act insurance does not require a small business with less than 50 full-time equivalent employees to provide health insurance. However, it is in the employer’s best interest to provide health insurance for its employees. And the businesses with more than 50 full-time equivalent employees or applicable large employers (ALEs) are obliged to provide health insurance. If they fail to comply, they will be fined or penalized.

How can you qualify for small business health insurance tax credit

Offering a group of health insurance in small business is optional. But as an employer, you can benefit from the health care tax credit. Your small business can qualify for the tax credit if you meet the insurance requirements.

  • Your small business has a total of 25 or fewer full-time equivalent employees.
  • The average salary of your employees is not greater than $54,200.
  • The small business pays at least 50 percent of the employee’s premiums.

Small businesses can generally receive higher health care tax credits. For example, if your small business has less than ten employees and earns an average salary of less than $25,000. You can qualify for the highest tax credit. In general, the health care tax credit helps you to purchase an affordable group health insurance. It also ensures the small businesses that the coverage meets the Affordable Care Act insurance requirements.

Can I save Money on Small Business Health Insurance Premiums?

If your small business did not qualify for a healthcare tax credit, you could still purchase a group health insurance for your employees. For example, you can still deduct the cost of your contribution to monthly employee premiums. It is a business expense for their federal taxes.

The group health insurance is an employer-sponsored coverage, but you can ask your employees to pay a portion of monthly premiums. You can contribute a maximum of 50 percent or less. You can deduct it directly to their paychecks while doing the employer cost-sharing requirements and the Affordable Care Act health insurance requirements.

Small business health insurance requirements regarding tax reporting

Small businesses need to keep in mind that there are certain tax reporting requirements. They need to accomplish the following to avoid penalties.

  • If your company or business decides to offer group health coverage upon meeting the insurance requirements, you need to report the insurance value you provide for each employee. The IRS requirements need information about the employees. They use the Form W-2 using the code DD.
  • Your business is obliged to withhold and report an additional 0.9 percent on employee compensation.
  • Your small business needs to pay a fee in funding the Patient-Centered Outcomes Research Trust Funds. In Form 720, you input and report your fee.

Can I institute a waiting period?

The group health policy that the small businesses offer include a waiting period. It is for the benefit of eligibility. The waiting period does not exceed 90 days.

Which Employee Disclosure rules do I face?

The small business that offers a group health plan coverage provides a Summary of Benefits and coverage forms to the employees. The forms explain the coverage of the health benefits and their cost.

Every year, small businesses inform their employees regarding the following details.

  • The benefit amount of the employee for the year.
  • Instructions for the employee if he/she wants to share the benefit amount that he/she receives. They can also exchange it in the marketplace if they are applying for the premium tax credit.
  • Explanation if ever you are subject to the tax penalty.
  • Failure to meet the requirements on time.


Health insurance for small businesses provides opportunities for both employers and employees. The Health Insurance for the company will attract full-time equivalent employees to extend their contracts and encourage recruits to become full-time employees. You can use it to mitigate your taxes. Enjoy your work life without thinking about the possible health care cost. And share it with your beneficiary or family. However, understanding the process and tax procedures is tricky. It is for the best if you consult your health insurance agent or financial advisor in this matter.

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