Small Employer Health Insurance
Small employers can choose whether to offer health insurance to their employees. If they offer health insurance, it must be available to all employees working 30 hours or more per week and their dependents.
Texas insurance law defines a small employer as a business with two to 50 employees, regardless of how many hours they work.
In general, insurance companies require at least 75 percent of a small employer’s full-time employees to participate in the health plan. However, some insurance companies require only 50% participation. If participation is a problem, explore the annual special open enrollment option.
Employers must give new employees at least 31 days from their start date to enroll in a health plan. After this time, employees may be required to wait up to a year for the next open enrollment period to join. Insurance companies must offer an open enrollment period each year.
Employers may require employees to wait up to the first of the month following 60 days of employment for their coverage to start.
Insurance companies can’t deny or limit coverage to employees with preexisting conditions.
Most employees have the option to keep their coverage for a time after leaving a job. Employers must tell employees about their rights to continue coverage. Former employees who choose to continue their coverage must pay the full cost of the plan. Employers aren’t required to pay premiums for former employees, even if they previously paid a share.
Paying for Coverage
The law doesn’t require employers to pay any part of an employee’s health plan premiums. However, many insurance companies require employers to pay at least 50 percent of their employees’ premiums. Employers may pay a higher percentage.
Insurance companies may raise premiums because of increases in health care costs or changes in the age of the group members. They can’t raise premiums because of health factors of individual group members, however. If an insurance company discontinues coverage at the end of a policy year, it must offer replacement coverage.
Affordable Care Act Requirements
Small businesses with fewer than 50 full-time equivalent employees don’t have to pay a penalty for not providing health insurance to their employees.
Federal law defines a full-time employee as one who works at least 30 hours during a typical week. The law counts each 120 hours worked by part-time employees in a month as one full-time equivalent employee.
Consider a company that has 30 full-time employees who work at least 120 hours each per month and 24 part-time workers who average 80 hours each per month.
To convert the part-time employees’ hours to full-time equivalent employees, multiply the number of part-time workers by the average number of hours they work each month: 24 x 80 = 1,920. Then divide the total number of hours worked by 120: 1,920/120 = 16. To get the total number of full-time equivalent employees, add this number to the number of full-time employees: 30 + 16 = 46. Thus, the employer in this example has 46 full-time equivalent employees and qualifies as a small employer under the law.