Business Health Insurance Requirements for 2024-2025

Do employers have to offer health insurance?

If you are considered a “small employer,” which means, according to the ACA, having less than 50 full-time employees, then you are not required to offer health insurance coverage for employees.

What does this mean for other employers? Businesses with 50 or more full-time employees are required to provide group health insurance coverage to their employees. If they do not, they will be liable for penalties and fines at the end of the tax year. [Are you looking for more information on health insurance? Check out our Small Business Guide to Health Insurance.]

Should small employers offer health insurance?

Even though they are not required to offer health insurance, there is a strong argument to make that small businesses should offer health insurance to their employees, if possible, since health insurance adds so much value for employees and their families. 

Many companies do offer health insurance, so not offering coverage may make it more difficult for your business to attract and maintain new talent. 

Pros of offering health insurance benefits

In addition to attracting quality candidates, here are six other advantages to investing in healthcare insurance for your employees:

• Employee retention (and satisfaction): Inadequate benefits could quickly push your best employees out of the company, especially if competitors offer better coverage. Providing robust health insurance options often plays an integral role in employee retention. 
• Lower premiums: Group plans typically cost less than individual plans, even within the ACA framework.
• Pretax benefit for employees: In many cases, small business-provided health insurance can reduce employees’ tax burden, which provides your workers with more take-home income.
• Healthier and productive employees: When employees have access to healthcare, they and their dependents can address health issues early on more easily. This results in healthier employees, who take fewer sick days and have an easier time focusing on their tasks. 
• Creating an employee-focused company culture: Few things boost company culture more than offering benefits that employees truly value. A solid benefits package shows employees that the company cares about them. Health insurance is one of those key benefits that a business can offer its workers that powerfully delivers this message.
• Possible employer tax credit eligibility: Some small businesses may qualify for tax credits if they offer health insurance options.

What is the ACA and how does it impact health insurance requirements?

The ACA has transformed the group health insurance industry over the years and it continues to evolve. Originally, the ACA had three main objectives:

1. To reform the private insurance market, especially for individuals and small-group purchasers.
2. To expand Medicaid to adults with an income at or below 133 percent of the federal poverty level.
3. To change the way that the insured, employers and insurance providers make medical decisions.

The overarching goal of the ACA is to expand health insurance access to many more Americans. Before the ACA, no employer was ever required to offer health insurance of any kind to employees.

The ACA includes premium tax credits and cost-sharing reductions to lower costs for lower-income employees and their covered dependents. The ACA tax credit also encourages smaller employers, who are not required to provide health insurance, to offer the benefit through the Small Business Health Options Program (SHOP). Through SHOP, the ACA offers smaller employer tax credits that reduce the cost of an employer-sponsored benefit that employees want.

How can employers determine their eligibility for the small business health insurance tax credit?

Small business owners who choose to offer group health insurance benefits for employees may qualify for small business health care tax credits through the ACA. For example, some employers qualify for the Small Business Health Care Tax Credit. The maximum credit for small business employers is 50 percent of the premiums paid. For small tax-exempt employers, including some nonprofits, it is 35 percent.  

Enrolling in a SHOP plan is necessary for a small business or nonprofit to claim the Small Business Health Care Tax Credit. Additionally, your business will need to meet all of the following criteria:

• You have fewer than 25 full-time-equivalent employees.
• The average employee salary is $50,000 per year or less.
• Your business pays at least 50 percent of your full-time employees’ premium costs.
• You will offer SHOP coverage to all of your full-time employees. (You don’t have to offer it to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.)

How to prepare for your 2024 ACA coverage

Starting on Nov. 1, 2023, businesses can enroll in a 2024 Marketplace healthcare plan. The deadline for enrollment is Dec. 15, 2023. Coverage kicks in on Jan. 1, 2024. 

Using a SHOP-registered agent or broker

Because enrollment can be complicated, it’s a good idea to work with a SHOP-registered agent or broker. There is no cost for using their services. You may want to consider working with an agent or broker for the following reasons: 

• They have experience helping small businesses enroll in SHOP coverage, so they could make the process easier for you. 
• Local brokers or agents should have an in-depth understanding of the health insurance market in your area.
• They can guide you through the plan selection process. 
• After you enroll, an agent or broker could answer your questions and help you navigate any issues you encounter. 

If you already have an agent or broker, you can continue working with them, as long as they are registered to sell SHOP insurance. Visit HealthCare.gov assistance to find an agent or broker who can help. 

Are there ACA-related tax reporting requirements for 2024?

Both small businesses and employees who benefit from their health insurance coverage must complete some reporting under the ACA. 

Under the ACA, employers, including small businesses, must report the total cost of coverage through employee-sponsored group health plans. That expense is recorded on W-2 forms. However, the value of each person’s health insurance coverage isn’t taxable. The data collected helps provide information about consumers’ coverage options. 

Employers with 50 employees or fewer should also provide all employees who receive health insurance benefits through their job with form 1095-B. The IRS uses this form to verify each individual’s health insurance coverage. 

In addition to reporting requirements, the ACA dictates that employers must withhold the .9 percent Additional Medicare Tax from employees’ wages if they make over $200,000 a year.

The best coverage for your company 

Navigating the various health insurance requirements and options under the ACA could be difficult for small businesses. However, offering health insurance often makes a huge difference for businesses looking to expand their talent and build strong teams. 

Of course, each employee has unique health, family and financial circumstances. To make the best impact, it’s important to offer a variety of plan options at different costs and coverage levels. Providing guidance for your staff as they navigate impactful healthcare decisions could also make them feel more supported and valued. Your administrative or HR team should understand plans thoroughly and be ready to answer enrollment questions.

Cailin Potami contributed to this article.