As the Trump administration continues to scale back the Affordable Care Act (ACA), many small businesses have raised questions about which portions of the law are still in effect in 2019.
In large part, small business health insurance requirements are the same in 2019 as they were in 2018. Small businesses are still not required to offer group health insurance, and they still have several options for compliantly providing health benefits to their employees.
In this post, we’ll go over what you need to know to comply with the ACA in 2019. We’ll also discuss benefits options for small businesses that are compliant both this year and in the coming years.
Do I need to offer health insurance in 2019?
Although the ACA’s individual mandate was eliminated beginning in 2019, the employer mandate is still in place, requiring applicable large employers (ALEs) to provide a certain percentage of their full-time-equivalent (FTE) employees with minimum essential coverage (MEC).
In 2019, ALEs are defined as any business that employed a combination of 50 or more FTE employees during six months or more of 2018.
Small businesses that don’t meet this definition aren’t subject to the employer mandate and thus don’t have to offer health insurance coverage.
Small business ACA options 2019
Even though small businesses aren’t legally required to offer health benefits, many do so anyway. Health is still the number-one benefit employees want from their company, and employees who are unsatisfied with their benefit are much more likely to look for a new job.
In 2019, small businesses have five popular options for offering health benefits that are compliant both currently and in years to come.
Traditional group health insurance. The public state- or federally-run SHOP Marketplaces are still in place in 2019, selling small group health insurance policies. These policies can be a good benefits option for small businesses if they can afford premiums, meet participation requirements, and ensure all employees will find value from the group policy.
QSEHRA. A new and increasingly popular option, the qualified small employer health reimbursement arrangement (QSEHRA) is a new HRA created by Congress in December 2016. With a QSEHRA, businesses offer employees a monthly allowance of tax-free money. Employees then choose and pay for health care, potentially including insurance policies, and the business reimburses them up to their allowance amount. All reimbursements are free of payroll tax for the business and its employees and can be free of income tax if the employee has MEC. The QSEHRA is often the best choice for small businesses: It allows businesses to set their own budgets while employees can purchase health care that’s tailored to fit their exact needs.
Group coverage HRA. Small businesses may choose to combine a traditional group policy and a reimbursement benefit with the group coverage HRA. With the group coverage HRA, the company offers a group policy (typically a high-deductible health plan) as well as a monthly allowance of tax-free money for employees. Group coverage HRAs typically reimburse deductible or coinsurance expenses that are also covered under the group policy. They don’t reimburse individual insurance premiums.
Association health plans. A new rule issued by the Department of Labor in 2018 expanded the availability of association health plans (AHPs) for small businesses. AHPs allow small businesses to band together within industries, professions, or geographic regions to either purchase large-group coverage or self-insure. Once the benefit is in place, it works much like a regular group policy or self-funded health insurance benefit would. However, AHPs aren’t subject to the ACA’s rating rule, which prevents insurers from varying costs in a specific region based on things like sex, age, or health status. They also don’t need to cover the essential health benefits that ACA-compliant policies do, and therefore don't have the consumer protections of other benefits. Additionally, a district court judge struck down the rules creating AHPs, casting doubt on their future.
Taxable stipends. Although not a formal option, some small businesses implement informal wage increases or stipends intended as an employee health benefit. With a stipend, business owners give each employee a flat raise and encourage them to spend it on the insurance and services they would otherwise receive as a benefit. This is rarely an ideal solution, as employees could be receiving this money tax-free through an HRA.
Do I face minimum contribution requirements?
Small businesses with fewer than 50 FTE employees aren’t subject to the ACA’s employer shared responsibility provision in 2019. This means they aren’t legally bound to pay a certain percentage of their employees’ group health insurance premiums, thus providing “affordable” coverage.
However, small businesses that wish to qualify for the Small Business Health Care Tax Credit (equal to 50 percent of the premiums the business pays for employees’ health insurance) must pay at least 50 percent of the annual premiums for employees’ group health coverage. They must also:
- have no more than 25 FTE employees
- pay employees average annual wages of no more than $53,400 in 2018
- pay at least 50 percent of the annual premiums for employees’ health insurance, and
- purchase the group policy through a SHOP marketplace.
Small businesses face no minimum contribution requirements with the QSEHRA or integrated HRA.
Can I institute a waiting period?
Small businesses offering a group health policy, QSEHRA, or group coverage HRA can institute waiting periods for benefit eligibility in 2019. However, these waiting periods cannot exceed 90 days.
Which employee disclosure rules do I face?
Small businesses offering a group health policy, QSEHRA, or group coverage HRA must provide employees with a standard Summary of Benefits and Coverage (SBC) form. These forms explain what their health benefit covers and what it costs, if applicable.
Small businesses offering a QSEHRA must also send a QSEHRA notice to their employees every year informing them of certain details, including:
- the employee’s benefit amount for the year,
- instructions that the employee must share the benefit amount with any exchange or marketplace if they’re applying for a premium tax credit, and
- an explanation that the employee could be subject to a tax penalty if they fail to maintain MEC during the year.
- Failure to meet either requirement could result in a fine.
Which reporting requirements do I face?
Small businesses offering health benefits face several reporting requirements in 2019.
Under the ACA, you must withhold and report an additional 0.9 percent on employee wages or compensation that exceeds $200,000.
If offering a group health insurance policy, you must report the value of the health insurance coverage you provided to each employee on his or her Form W-2, box 12 using code DD.
If offering a QSEHRA, you must report the amount of tax-free payments and reimbursements you provided to each employee on his or her W-2, box 12 using code FF. You must also report all taxable reimbursements made through the QSEHRA as other compensation in box 1, Wages, tips, and other compensation.
Additionally, you’re required to pay a fee to help fund the Patient-Centered Outcomes Research Trust Fund, and you must report it using Form 720.
With plenty of health benefits options available, including the new QSEHRA, small businesses can offer benefits successfully in 2019 and in many years to come.
Though the future of the ACA is uncertain, PeopleKeep is committed to providing small businesses peace of mind with their benefits solutions. Subscribe to our blog to stay updated on regulatory changes that could affect your business.