What Small Businesses Need to Know About the Employer Mandate

Employers with 100 or fewer full-time equivalent employees can get health insurance through Covered California for Small Business.

The Affordable Care Act requires applicable large employers (employers with 50 or more full-time equivalent employees) to offer affordable health insurance that meets a minimum standard or pay a “shared responsibility” penalty.

Understanding whether you're required to offer health insurance is important for you to know as a business owner and can be confusing.

You might ask:

• What’s a full-time equivalent employee, and how do I calculate how many I have?

• How do I determine whether the law requires me to offer health insurance?

• What is my “shared responsibility” payment if I don't offer insurance?

• How do I know if my company is eligible for Covered California for Small Business?

Covered California for Small Business is here to help. The IRS has multiple tools to assist employers in determining full-time equivalent employee counts, how to determine if you are an applicable large employer, and what your shared responsibility would be for not offering Affordable Care Act-compliant health insurance.

Resources

Affordable Care Act Estimator Tools

Watch the IRS video "Employer Shared Responsibility Payments" to find out if you are subject to the employer shared responsibility provision.

View the IRS video "Are you an applicable large employer?" to see what you need to know if you are considered an applicable large employer.

To learn more about offering Affordable Care Act-compliant health benefits through Covered California for Small Business, visit CoveredCA.com/ForSmallBusiness or call us at (844) 332-8384.

Employers with 50 or more employees are required to complete one 1095-C for each employee. The 1095-C form is a tax form employers use to report their offers of insurance for the previous year. Specifically, the 1095-C form provides details about the covered services offered to the employee, the lowest-cost premium available to the employee, and the months of the year when health insurance was available.

The Internal Revenue Service (IRS) uses these forms, along with the 1094-C Transmittal form, to confirm that all businesses are complying with the mandate to offer affordable minimum benefits covered by all plans. All eligible employees should receive a Form 1095-C, regardless of whether they actually participate in the employer’s health insurance plan.

Additionally, employees who are offered affordable minimum essential coverage by their employers are not eligible for premium tax credits if they purchase a plan through Covered California. The IRS uses the information on Form 1095-C to confirm that no employees who have been offered affordable minimum essential coverage by their employer are receiving tax subsidies to purchase coverage through Covered California.

Get more information on the IRS reporting forms.

The IRS will contact employers directly to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made.

An employer may appeal an employer notice if it asserts that it offers affordable minimum essential coverage to employees or that its employee is enrolled in health insurance through an employer and therefore ineligible for premium tax credits. Employers have 90 days from the date of the notice it receives from Covered California to request an appeal. Employer appeals will be handled by the IRS.

In 2016, the definition of “small employer” was expanded to include businesses with 50 to 100 full-time equivalent (FTE) employees. This means that Covered California for Small Business is now available to small businesses with up to 100 FTE employees, whereas it was not before.

Through Covered California for Small Business, small businesses can shop for insurance for their employees among multiple health insurance companies across metal tiers (including Bronze, Silver, Gold, and Platinum). Covered California also relieves employers of administrative burden by handling much of the payment distribution to health insurance plans across health insurance companies. Federal tax credits are available to those businesses that qualify.

Health insurance companies offering products in the large group market are prohibited from marketing, offering, amending or renewing a large group plan contract or policy that provides a minimum value of less than 60 percent. Large businesses purchasing a health insurance plan for their employees should confirm that the health insurance plan provides at least 60 percent minimum value.

Small business owners with fewer than 50 full-time employees are not required to offer health insurance to their employees. However, you should know that if a small business with fewer than 50 full-time employees does offer coverage, then that coverage must comply with the requirements of the Affordable Care Act. Such requirements include coverage of the 10 essential health benefits, no lifetime or annual benefit maximums and adherence to consumer protections built into the Affordable Care Act..

Additionally, small businesses that provide health insurance through Covered California for Small Business may be eligible for tax credits if:

• They have fewer than 25 full-time equivalent employees for the tax year;

• The average annual wages paid are less than $67,000 per employee; and,

• The employer pays at least 50 percent of the employee's monthly premium.

Small businesses can offer dependent insurance through Covered California for Small Business. In the event that employers do not offer coverage for their employees’ dependents, employees may be able to purchase a health insurance plan for their dependents through Covered California. However, if a business offers insurance for employees’ dependents, those dependents are ineligible for financial help with a Covered California health insurance plan.

For additional information on the Affordable Care Act tax provisions for small employers, visit: https://www.irs.gov/affordable-care-act/employers/affordable-care-act-tax-provisions-for-small-employers.

Talk to Covered California for Small Business, your health or dental insurance company representative, or your insurance agent to discuss your options.

For more information on Covered California for Small Business, visit: www.CoveredCA.com/ForSmallBusiness or call: (844) 332-8384.

For additional information on the employer mandate, visit: https://www.irs.gov/Affordable-Care-Act/Employers/Employer-Shared-Responsibility-Provisions.

Employer Mandate FAQs