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

Written by: Elizabeth Walker
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Published on May 18, 2022.

Having access to employee benefits like health insurance isn’t always guaranteed for part-time employees. According to the Bureau of Labor Statistics, only 23% of employees with part-time jobs were offered employer-sponsored health insurance.

Most recruiting efforts focus on attracting and retaining full-time employees. But in this tight labor market, the part-time workforce continues to increase. Offering a part-time job with health insurance benefits can go a long way toward recruiting talented part-time candidates.

Providing your part-time employees with a health plan isn’t as difficult as you think. There are few regulations surrounding part-time work, so employers have some flexibility when determining eligibility.

Employers that offer health insurance to their part-time workers still need to comply with federal and state regulations. This blog will cover the requirements for offering health insurance to part-time employees as well as health benefit options available to employers.

Find out the average cost of health insurance in your state with our comparison chart

What is considered part-time employment?

Business owners typically consider full-time employment as 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 days in a row.

Other than that basic criteria, the Fair Labor Standards Act 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 stipulate what is considered part-time work. It's the employer's responsibility to choose the maximum hours for a part-time worker and communicate that to their employees in writing during the hiring process.

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

The Affordable Care Act’s (ACA) employer mandate requires applicable large employers (ALEs) with 50+ full-time equivalent (FTE) employees to offer affordable health insurance to their workers or be subject to a tax penalty. The ACA defines full-time employees as those who work at least 30 hours per week.

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

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 employee retention, boost workplace morale, and increase job satisfaction.

Calculate the number of FTEs in your organization with our worksheet

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

Providing health insurance is one of the top employee benefits you can offer at your organization. But before you get started, eligibility for employees doing part-time work 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 rules

According to the ACA, healthcare benefits must be offered consistently to all similarly situated employees. This means an employer can’t offer health insurance to one part-time worker, but deny health coverage to another part-time employee working the same amount 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 regulations surrounding eligibility, as long as it’s clearly articulated and applied consistently.

Insurance carrier rules

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 entirely. That’s why it’s important to check with your insurance carrier before providing your part-time workers health coverage.

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

If you offer health insurance to your part-time employees, they would be counted in your participation requirements. Employers should consider this aspect so their minimum participation rate is met according to your insurance carrier's guidelines.

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

Just because it’s not required to offer health insurance to your part-time staff doesn’t mean employers shouldn’t do it. Hourly wages are always important, but part-time job seekers typically expect some kind of fringe benefits presented to them during the hiring process. Luckily for small employers, there are cost-effective health benefit options for both your full and part-time employees' healthcare needs.

Below we’ll go over 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 qualifying medical expenses and sometimes individual health insurance premiums.

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 are not pre-funded accounts. Employers set their desired monthly allowance amount, and employees are only reimbursed 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 less than 50 employees that don’t offer group health insurance.

When offering a QSEHRA, they’re 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 their full-time employees.

The other two HRAs for employers of any size are the individual coverage HRA (ICHRA) and the integrated HRA, or the group coverage HRA (GCRA). The biggest difference between the two is that ICHRAs only work with individual health insurance, like the QSEHRA, while integrated HRAs coordinate with group health insurance.

Both ICHRAs and integrated HRAs have the ability to set specific employee classes. 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. Employees in different classes can be offered different allowance amounts, but those within the same class must be offered the same allowance.

Find out which HRA is right for you with our HRA quiz

Health stipends

A health stipend is a fixed amount of money offered to employees designed to help pay for a health insurance plan and other medical expenses. They’re a good option for businesses that don’t want 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.

However, stipends are less regulated than HRAs. Employers can’t make their employees prove they spent their allowance on a health insurance policy or healthcare items. Also, stipends are typically added to an employee’s paycheck as extra income, so they’re subject to income taxes.

WorkPerks is a software platform powered by PeopleKeep for businesses of all sizes that helps employers offer reimbursable fringe benefits, such as an employee stipend. With WorkPerks, you’ll be able to offer your full and part-time workers comprehensive employee benefits.

Read about more pros and cons of health insurance stipends in our blog

Conclusion

Offering health benefits to better recruit part-time hires comes with several advantages. While not legally required, employers can better attract and retain talent, promote a healthy workforce, and show their employees they care about their wellbeing—no matter if they’re full or part-time employees.

With an HRA or a stipend, your part-time staff will have a personalized health benefit that meets all their healthcare needs without you breaking your budget. Contact PeopleKeep today and get set up with the perfect health benefit solution for your organization.

Originally published on May 18, 2022. Last updated May 18, 2022.
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