Do employers have to offer health insurance to part-time workers?

How is part-time employment defined?

Business owners typically consider full-time employment to be someone who works 40 or more hours each week. Part-time employees usually work an average of 30 or fewer hours per week or less than 130 hours per month for more than 120 consecutive days.

Other than this basic standard, the Fair Labor Standards Act² and other employment laws don’t outline specific requirements. Generally, individual businesses determine what they consider to be part-time hours.

Employers should also consider any state and local laws that may provide extra guidelines regarding part-time work. It's the employer's responsibility to choose the maximum hours for a part-time worker and communicate that to their workers in writing during the hiring process and in the employee handbook for future reference.

For the purposes of health benefits, the Affordable Care Act (ACA) defines a full-time employee as someone who works at least 30 hours per week.

Do employers have to offer health insurance to their part-time workers?

The ACA’s employer mandate requires applicable large employers (ALEs) with 50 or more full-time equivalent (FTE) employees to offer affordable health insurance to their full-time workers or be subject to a tax penalty.

If you have fewer than 50 FTEs, federal law doesn’t require you to offer health insurance coverage to any of your employees. If you’re an ALE with part-time employees who work less than 30 hours per week, you don’t have to provide them access to health insurance—-even if you’re providing insurance to your full-time workers.

However, even if not legally required, employers may offer their part-time employees health insurance if they wish. Offering health insurance benefits to those with part-time positions can help improve retention, boost employee morale, increase job satisfaction, and create a more inclusive workplace culture.

What are the requirements for offering health insurance to part-time employees?

Health insurance is one of the top employee benefits you can offer at your organization. But before you get started, eligibility for part-time employees depends on federal and state laws, your insurance provider, and other factors.

Let’s dive into the two main requirements for offering health insurance to your part-time employees in the sections below.

ACA requirements

According to the ACA, employers must consistently offer healthcare benefits to all similarly situated employees. This means an employer can’t provide health insurance to one part-time worker but deny medical coverage to another part-time employee working the same number of hours and the same type of job.

Employers should create a written document within their company policy guidelines detailing part-time employee eligibility requirements for health insurance. Individual businesses can set their own eligibility regulations if they’re clearly articulated and applied consistently.

Health insurance carrier requirements

Insurance companies have different rules around offering health insurance to part-time employees. Some insurers have policies that allow offering health insurance to part-time workers, while others prohibit it. That’s why checking with your insurance carrier before providing your part-time workers with health coverage is essential.

Additionally, some insurance companies have minimum participation requirements for their health insurance policies. This means that out of all the eligible employees you offer your medical plan, a minimum percentage of them must purchase and use it.

If you offer health insurance to your part-time employees, you must include them in your participation rate calculations. This number is essential for employers to know so they can meet their policy’s minimum participation rate according to the insurance carrier's guidelines.

How employers can offer a health benefit to their part-time employees

Just because federal law doesn’t require you to provide health insurance to your part-time staff doesn’t mean you shouldn’t. Hourly wages are always important, but part-time job seekers typically want to have some fringe benefits before accepting a new job.

Luckily, there are cost-effective health benefit options for both your full- and part-time employees' healthcare needs. Below are two healthcare benefits options for employers of all sizes that are rising in popularity—health reimbursement arrangements (HRAs) and health stipends.

Health reimbursement arrangements (HRAs)

An HRA is an employer-funded health benefit that allows employers to reimburse their employees for individual health insurance premiums and qualifying out-of-pocket costs.

HRAs are beneficial for both employers and employees. Employer contributions are tax-deductible and free of payroll taxes, plus employee reimbursements are income tax-free, as long as their health insurance policy meets minimum essential coverage (MEC).

HRAs aren’t pre-funded accounts. Employers set their desired monthly allowance amount and reimburse employees only when they incur an eligible expense. Unlike health savings accounts (HSAs), HRA funds stay with the employer when an employee leaves the company.

There are three popular types of HRAs, the first one being a qualified small employer HRA (QSEHRA). QSEHRAs are for employers with fewer than 50 FTEs that don’t offer traditional group health insurance.

When offering a QSEHRA, the benefit is automatically available to all full-time W-2 employees. But employers can offer it to part-time employees as long as they receive the same allowance amount as workers with a full-time position.

The other two HRAs for employers of any size are the individual coverage HRA (ICHRA) and the integrated HRA, also known as the group coverage HRA (GCHRA). The biggest difference between the two benefits is that ICHRAs are meant to cover employees’ individual health insurance policies, like the QSEHRA, while integrated HRAs can only supplement employer-sponsored group health insurance.

Both ICHRAs and integrated HRAs allow you to create specific employee classes to customize eligibility and allowances. Employee classes separate employees into groups by legitimate job-based criteria, such as part-time employees.

ICHRAs have 11 employee class options, and integrated HRAs have seven. You can offer employees in different classes different allowance amounts, but those within the same class must have the same allowance.

Health stipends

A health stipend is a fixed amount of money offered to employees designed to help pay for healthcare coverage and other medical expenses. They’re a good option for businesses not wanting to deal with restrictive and costly group health insurance plans.

Stipends are a very flexible health benefit option. Employees can choose the healthcare items that suit their needs, and employers can choose monthly allowance caps, giving them total control over their healthcare benefits costs.

Better yet, both full-time and part-time employees are eligible to receive a stipend, making it an inclusive option to reduce the cost of coverage and other medical expenses.

However, stipends aren’t considered a formal health benefit like HRAs. Employers can’t make their employees prove they spent their allowance on a health insurance policy or healthcare items listed in IRS Publication 502. Also, you typically add stipends to an employee’s paycheck as extra income, so they’re subject to income taxes.

If you have more than 50 FTEs, a stipend can’t help you satisfy the employer mandate. But, it’s a great option for smaller organizations or as a supplemental benefit in addition to an HRA or health insurance.

Conclusion

Offering part-time employee benefits like health insurance comes with several advantages. While not legally required, employers can better attract and retain talent, promote a healthy workforce, and show employees they care about their well-being—whether they work full- or part-time.

With an HRA, your part-time staff will have a personalized health benefit that meets all their medical care needs without breaking your budget.

Contact PeopleKeep today, and we’ll set you up with the right HRA for your organization.

This article was originally published on May 18, 2022. It was last updated on December 4, 2023.

1. https://www.bls.gov/news.release/pdf/ebs2.pdf
2. https://www.dol.gov/agencies/whd/flsa