Small Business and the Affordable Care Act

Under the Affordable Care Act (ACA), small businesses with fewer than 50 full-time equivalent employees, are NOT required to provide health insurance to their employees. However, they have the option of purchasing private insurance through the Small Business Health Options Program (SHOP) marketplace in their state. By enrolling in a SHOP plan, employers may be eligible to claim the Small Business Health Care Tax.

Employers can sign up for SHOP coverage at any time. There is no restricted enrollment period when employers can start offering a SHOP plan to their employees. Visit HealthCare.gov/small-business for information on SHOP eligibility, available plans, and how much an employer may be able to save with the Small Business Health Care Tax Credit. Employers can enroll directly with an insurance company, or with the assistance of a SHOP registered agent or broker. To qualify for SHOP, an organization must:

  • Employ 1-50 full time equivalent employees (30 hours or more a week for more than 120 days in a year is considered full time equivalent)
  • Offer coverage to all full time employees
  • Enroll at least 70% of the employees that are offered insurance to (enrolling in SHOP coverage between November 15 and December 15 removes this requirement)
  • Have a worksite within the SHOP state
Employers who use SHOP must offer coverage to all of their full-time employees, or those who worked on average 30 hours or more a week for more than 120 days in a year. Employers can but do not have to offer coverage to their part-time employees – those who worked on average less than 30 hours per week but more than 120 days per year. California, Colorado, New York, and Vermont are the only states that make the SHOP Marketplace available to businesses with up to 100 full-time equivalent employees. If companies have employees in multiple states, they can participate in multiple SHOP marketplaces, or they can choose a single health plan with a multi-state or national provider network and offer that plan in all of their business operation locations however, employers can establish only one health coverage account per state. 

There is a SHOP marketplace in each state, and each has a different set of health companies plan options and prices. For some states, the SHOP marketplace is operated by the federal government and enrollment takes place on Healthcare.gov. For California, Colorado, Connecticut, District of Columbia, Idaho, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont, and Washington, enrollment takes place on their state-run websites.  


Sign Up

For small businesses that are ready to obtain employee health coverage, go to Healthcare.gov, select a state, and follow the directions. To fill out a SHOP application, employers will need:

  • Employer Identification Number/Tax ID
  • Number of full time employees
  • Employee information such as date of birth, social security number, address, date-of-hire, and contact information for all employees (and their dependents, if offering dependent coverage)

After employers complete the process and confirm their health coverage offer, the SHOP marketplace will send an email to all included employees. The email includes the company participation code and a link to the SHOP website where employees can accept or decline the offer of heath coverage.

Cost to Employer

In every state, employers can select at least one plan to offer to their employees. In some states, employers can select a plan category (i.e. Bronze, Silver, Gold, Platinum) and allow employees to choose any plan from any insurance company within that category (known as Employee Choice).

The cost of health insurance for employers will depend on several factors, such as:

  • The level of coverage (Bronze, Silver, Gold or Platinum) offered to employees. Again, the number of options vary by state.
  • Whether dependent coverage (some states require it) and/or dental insurance is offered to employees.

The Small Business Health Care Tax Credit can also reduce your premium costs. Employers may be eligible if they meet the following conditions:  

  • Cover at least half of employees’ premium costs
  • Have fewer than 25 full-time equivalent employees
  • Paid less than $54,000 average annual wages per full-time equivalent employee
  • Purchase their coverage through the SHOP marketplace.  

 

Cost to Employees

Employees can pay part of their health insurance costs. An employee’s share of cost depends on the level of coverage they choose and the plan they select. Under the Affordable Care Act, all health plans are classified into one of four categories: Bronze, Silver, Gold and Platinum. The benefits offered by the plans remain the same across the different tiers, but the premium price, deductibles, and out-of-pocket expenses vary among the metal levels. These rankings help to compare different health plans. Some states offer all four levels of plans while other states offer two or three levels of plans. The SHOP website for each state lists all of their plan options.

The employer sets the category in which their employees choose plans from as well as how much they will contribute to the premium payment as either a fixed amount (for example, $400 per month) or as a percentage of total cost for employees (for example, 70% of premium). 

Self-Employed

In order to purchase insurance through a SHOP, a company must have at least one employee other than the owner who receives a W-2 tax form at the end of the year. Those who are self-employed without any other employees, can purchase insurance through the individual Exchange in their state. See the ACA overview and 50 State Exchange pages of this website for more information. 

Small Business Not Offering Health Coverage

Employees are able to purchase health insurance on their own in the traditional insurance market or through the Exchange in their state (where they may be eligible for subsidies based on their income). Depending on employee income and the state they live in, they may be eligible for Medicaid coverage for low income individuals. Refer employees to TCHS’ State Exchange page and Medicaid guide under ACA Overview for state-specific information. 

Small Business Offering Health Coverage

If employers already provide health insurance to their employees, there is no need to change coverage.  However, if employers provide health insurance for their employees, they can check increased benefits or more affordable coverage through their state's SHOP and see if they qualify for any tax credits. Only plans purchased through the SHOP are eligible for the tax credit. 

Brokers, Agents, and Navigators:

Brokers and agents are licensed by each state to assist individuals, employers and their employees, and to enroll them in health insurance plans. They can also help employers apply for and enroll them in coverage in the state SHOP Marketplace. Note that the registered broker or agent also should have a National Producer Number (NPN).

You should not pay more if you use a SHOP agent or broker.

A licensed broker or agent can help employers:

  • Understand eligibility for SHOP and for the Small Business Health Care Tax Credit
  • Review and compare price, coverage, quality, and other important features
  • Choose a plan based on the company’s budget, business, and employees
  • Apply for health insurance for your employees

If employers already have a broker or agent, they can continue using the current licensed broker or agent to buy health insurance in the SHOP, provided that broker or agent is affiliated with the SHOP Marketplace.

The premiums paid by the employer will be the same with or without the help of broker or agent. Brokers or agents are usually compensated by the health insurance companies whose policies they sell.

Navigators

A Navigator is an individual or organization trained and authorized to help consumers, small businesses, and employees of small businesses to look for health coverage options through the Marketplace. They can complete eligibility and enrollment forms. Unlike brokers, navigators do not have any affiliation with an insurance company. Navigators are obligated to provide information to those they help in a fair, accurate, and unbiased manner. 

256056 

05/20