How Does Company Size Affect Health Insurance Decisions?

There are a few primary distinctions between large employers (those with 50 or more employees) and small employers that provide health benefits. One of the most significant variations is how companies buy insurance for their workers.

All large employers are required to offer health insurance to their workers, as specified in the Affordable Care Act.  Small employers (those with less than 50 employees) are not obligated to provide health insurance but often opt to do so.

Counting Your Employees

Determining which employees must be offered health insurance depends on their hours worked and whether they qualify as full-time or full-time equivalent (FTE) employees. AN FTE calculator can help you determine the number of full-time employees.

The Affordable Care Act separates company employees and affiliates into five primary categories as follows:

• Full-time employee. They must work at least 30 hours per week or 130 hours a month for more than 120 consecutive days. Full-time workers receive employee benefits.

• Part-time employee. If they work less than 30 hours per week or 130 hours a month for more than 120 consecutive days, they are considered part-time employees. They could receive full or partial benefits, but only at the employer’s discretion.

• Seasonal employee. These employees work for a period of six months or less during approximately the same time of the year. The Affordable Care Act does not penalize employers for not providing health insurance during the “initial measurement period” even if they work more than 30 hours per week.

• Temporary employee. Also known as “short-term employees” under the Affordable Care Act, temporary employees are hired for less than one year. If they work more than 30 hours per week, they are considered full-time.

• 1099 (independent contractor): Independent contractors (also known as “freelance” workers) are not considered employees and therefore the employer does not provide them with health insurance.

Who Qualifies as a Small Employer?

Companies with fewer than 50 full-time workers are considered small employers under the Affordable Care Act's insurance provisions, and they will continue to be exempt from providing community health insurance benefits to their employees in 2021. Providing workplace benefits is optional for small employers.

What is an Applicable Large Employer (ALE)?

Any company with an average of 50 FTE employees over a calendar year is considered by the Affordable Care Act to be an Applicable Large Employer in the following calendar year.

Applicable Large Employers must provide employees with health insurance that meets the following criteria:

Employer Mandate

Under the Employer Mandate, an Applicable Large Employer has two options regarding the health insurance access for employees. They are as follows.

1) Comply with the Employer Shared Responsibility Provisions:

• You must provide comprehensive, “minimum value” health benefits to 95 percent of your full-time workers and their dependents up until the end of the month in which those dependents turn 26 years old. To qualify as a “minimum value” health insurance policy, the plan must pay at least 60% of the predefined covered service costs.

• You must also provide health insurance that is defined as “affordable,” meaning that the policy costs no more than 9.83 percent of the employee’s paycheck.

2) Pay tax penalties:

• If you decide against providing health insurance to employees, you will pay a tax penalty of $2,700 per employee minus the first 30 employees.

• For example, if you employ 70 full-time workers, your tax penalty would be $2,700 x (70-30) or $108,000.

What New Rules and Requirements Did the ACA Impose on Groups?

The Affordable Care Act imposes requirements on employers who provide health insurance.

Some of those more recent requirements include the following.

Annual Limits. Health Plans may not impose annual limits on Essential Health Benefits (EHBs), though there is an exception for non-grandfathered plans.

Limits on Cost Sharing. In 2021 the annual out-of-pocket (OOP) maximum may not exceed $8,550 for an individual or $17,100 for a family.

Excessive Waiting Periods. A group health plan may no longer impose a waiting period that exceeds ninety (90) days.

Pre-Existing Conditions: Insurance plans can no longer exclude employees with pre-existing conditions of any kind.

Minimum Essential Coverage. There is a comprehensive list of minimum essential coverages that carriers must provide to small employer participants to be sold on health insurance exchanges.

Self-Funded Plans. Small employers that offer self-funded health plans must complete the 1094-C and 1095-C employer reporting forms.

Fully Funded Plans. For fully-funded small employers, the carrier is required to complete the filing.

Applicable Large Employers. Applicable Large Employers that offer fully funded or self-funded plans must complete the 1094-C and 1095-C employer reporting forms themselves.

Summary of Benefits and Coverage (SBC). The employer is required to provide each employee with a copy of the comprehensive SBC on the following dates:

• The employee’s first day of coverage under the plan.

• During the company’s annual open enrollment period.

• On any other date as requested by the employee.

Patient-Centered Outcomes Research Institute (PCORI) Fees:

• For fully-funded plans, the PCORI fees are paid by the insurance provider.

• For self-funded plans, the PCORI fees are paid by the employer.

Flexible Spending Account (FSA): The annual FSA election limit has lowered to $2,500 for an individual.

Preventive services coverage. Preventive services now must be covered at 100% if performed inside the network by an in-network provider.

Lifetime benefit limits. Lifetime benefit limits have been removed from insurance policies.

A Cycle of Change, Understanding the Difference Between Small and Large Employers

Healthcare reform has been a top headline in recent years, and revisions to rules and regulations sometimes seem constant. If you are unsure as to what has changed (or even when it changed), you are not alone.

At Benefit Concepts, we understand that the healthcare insurance industry can be complicated and dynamic. Our team of professionals is available to help guide you through your policy choices during these volatile times.

Contact us today to discuss what policies are right for you and your employees.

NOTE: This content is not intended to be taken as legal, benefits, or HR advice. Since regulations change over time and can vary by location and employer size, consult a licensed broker or HR certified expert for specific guidance.