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Knowing Your Small Business Health Insurance Obligations Can Save You From Costly Headaches

Small business health insurance requirements established by the Affordable Care Act are like many other laws,  ignore them at your peril. For example, you are free to ignore a posted speed limit while driving, or you can rob a bank if you really want to. But if you do so, you should be ready to face the consequences.

The same holds true with providing your Colorado Springs area employees with group health insurance. Can the state or national government force your company to offer coverage? No. Can they make you pay a ton of money in penalties and create enormous headaches for your business for not doing so? Big time.

Avoiding these costly fees is why you need to understand Colorado’s small business health insurance requirements. And even if you think those requirements are unfair and burdensome, or your business is small enough that it doesn’t need to provide coverage, there are plenty of reasons other than the law why you should seriously consider offering a group health insurance plan.

Less Than 50 Full-Time Employees? No Requirement to Provide Small Business Health Insurance

If your Colorado company has less than 50 full-time or “full-time equivalent” (FTE) employees, it has no legal obligation under the ACA or any other law to offer or provide group health insurance to those employees.

For purposes of the ACA, a full-time employee qualifies as one who works 30 hours or more each week or 130 hours each calendar month, including vacation and paid leave time.

Companies with less than 50 full-time employees may still need to provide coverage if they have 50 or more full-time equivalent employees. The ACA defines FTE as “a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.”

That may sound confusing, but the law provides guidance on how to calculate your number of full-time-equivalent employees:

  1. Combine the number of work hours of all non-full-time employees for each month but do not include more than 120 hours of service per employee, and
  2. Divide that total by 120.

The IRS has some handy guidance that can help explain in greater detail whether your company falls below or above the 50 employee limit and whether you, therefore, have an obligation to offer coverage. Learn more about employers who provide health insurance and what that entails in this article.

50+ Full-Time Employees? You Must Offer Health Insurance Coverage

If your Colorado company has 50 or more full-time or FTE employees, the law considers it an “applicable large employer” (ALE) that must offer an ACA-compliant group health insurance plan to at least 95% of its full-time employees. Almost all plans purchased through private insurers or the Health Exchange Marketplace will meet these requirements, but you must confirm that the coverage your company is considering complies with the ACA. The best way to do that is to meet with an experienced small business health insurance broker.

Penalties for Non-Compliance with Small Business Health Insurance Requirements

ALE’s with 50+ FTE employees that don’t offer ACA-compliant coverage should brace themselves for a tax penalty of $3,860 per employee for failing to do so.

Beyond which companies need to offer coverage, prepare yourself for a multitude of reporting and other administrative requirements for small business health insurance programs. A Colorado small business health insurance broker not only can help you understand these obligations but can also help you fulfill them as you manage and administer your program in the years ahead.

If your company offers a group health insurance plan to any full-time workers, you must generally offer coverage for every employee. You can then choose whether or not to provide coverage for your part-time employees working under 30 hours weekly.

Even if your business is below the 50 full-time employee threshold, you should consider offering coverage to your full-time as well as your part-time employees. Not only will doing so help you attract and retain top talent, but your company may also be able to avail itself of significant tax benefits.

Preferred Insurance: Colorado’s Small Business Health Insurance Experts

Preferred Insurance is an experienced Colorado Springs business health insurance broker that works hand-in-hand with small businesses throughout the state to develop and implement group health insurance programs that keep their employees and budgets healthy. Our knowledgeable and accessible representatives will answer all your questions and provide solutions best suited to your company’s needs. We are locally owned and operated and provide free quotes in less than 48 hours.

Call Preferred Insurance today to schedule a free consultation about your small business health insurance needs.

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