Small Business healthcare tax credit:
As an owner of a small business, you may be qualified for certain health care tax credits if you have less than 25 full-time equivalent employees that make an average annual salary of approximately $50,000 or less.
This tax credit can go up to 50% of your portion paid toward your employees’ premium costs. Or up to 35% for employers who are tax exempt.
The following criteria must be met, in order to qualify for the tax credit:
- There are fewer than 25 full-time equivalent employees
- The average annual salary per employee is approximately $50,000 or less
- Coverage through the SHOP Marketplace is offered to your full-time employees
- You pay at minimum 50% of the premium costs for your full-time employees
You are not required to offer coverage for part-time employees who work less than 30 hours per week or dependents to be able to qualify for the tax credit. Seasonal workers that work fewer than 120 days during the tax year are not included in the full-time employee and wage calculation.
The smaller the business, the higher the benefits will be. Small businesses with less than 10 employees and an average annual salary of $25,000 or less qualify for the highest tax credit.
Once again, it is important to remember that you must purchase your coverage through the SHOP Marketplace in order to qualify for the Small Business Health Care Tax Credit.
Employer requirements when having a certain number of employees
The Small Business Health Options Program (referred to as SHOP) marketplace is designed to assist with providing health coverage to the employees of small businesses
This program is open to employers of businesses, including non-profit organizations that have 50 or fewer full-time equivalent (FTE) employees. Generally speaking, this refers to employees averaging 30 or more hours per week. The SHOP Marketplace allows small businesses to offer healthcare and dental coverage with the flexibility, choice, and online application and management capabilities to meet the needs of their employees.
The requirements for a small business to use the SHOP Marketplace to offer coverage to their employees are as follows:
- There must be no more than 50 full-time employees
- Coverage must be offered to all of the FTEs
- A percentage requirement for FTE SHOP enrollment must be met.
- Each state determines this percentage. However, most states require a minimum of 70% of full-time employees must enroll in your SHOP plan
- If an employer enrolls in a SHOP coverage plan between November 15 and December 15 each year, they are not required to meet the percentage requirement in order to offer it to their employees
- The employer must have a work site or office within the SHOP’s service area which may be operated either by as state agency or the federal government
Need 2016 HealthCare Coverage? There is still time to qualify!
Choosing Health Insurance for Your Business
When making a decision on health coverage to offer your employees, there are 4 categories of plans within the SHOP Marketplace to choose from. The categories Bronze, Silver, Gold, and Platinum all offer comparable benefits. But they differ in the cost sharing between the plan and employee in regards to things like premiums, deductibles, copayments and out-of-pocket expenses for the year for extensive care, if applicable.
As an employer, it is acceptable for you to offer one plan to your employees. Some states will even allow you to choose a category and allow the employee to decide which plan to choose within that category.
The 4 categories in the SHOP Marketplace and how they differ in cost structure are listed below:
- Bronze – This plan covers around 60% of the total cost for care with the employee paying the other 40%
- Silver – This plan covers around 70% of the total cost for care with the employee paying the other 30%
- Gold – This plan covers around 80% of the total cost for care with the employee paying the other 20%
- Platinum – This plan covers around 90% of the total cost for care with the employee paying the other 10%
Since all plans offered in the SHOP Marketplace are required to cover a set of essential health benefits, pre-existing conditions, and some free preventative services, the difference in the 4 categories, or “metal levels,” are not in the quality of care, but in the breakdown of how the cost for care is shared.
Regardless of which SHOP coverage you decide to offer, you and your employees each pay a portion of a monthly premium. But also, depending on the coverage, this monthly premium is directly correlated to the out-of-pocket expense for the care that they receive. Plans that offer the lowest premium, such as the Bronze category, will often pay a smaller share of the cost for medical care. Whereas plans that offer higher premiums, the Platinum category, will typically take on a larger share of the medical expense for the medical care. This is important to consider when choosing plans and determining the value for you and your employees.
Offering Employees More Than One Plan Choice
As an employer, it is acceptable for you to offer one plan to your employees. Some states will even allow you to choose a category and allow the employee to decide which plan to choose within that category. If your small business is located in an Employee Choice state, you have the choice to offer multiple plans though the Employee Choice option or offer just a single plan for your employees when you fill out your SHOP application.
The 2015 Employee Choice Option states are as follows:
- North Dakota