Navigator Guide FAQs of the Week: Small Businesses
It’s Open Enrollment for the Affordable Care Act’s (ACA) marketplaces, and in most states, December 15 is the deadline to enroll in a plan that begins on January 1, 2023. The marketplaces are critical source of health insurance for small businesses, including small business owners, sole proprietors, and workers. This week, we highlight FAQs from our Navigator Resource Guide for small business owners and their employees.
My employer just told us we are enrolling in “SHOP” coverage. What is SHOP coverage?
The SHOP marketplace is where small employers may purchase group plans for their employees. There may be federal tax credits available to help the employer pay for employees’ coverage. The determination for the tax credit takes into account the size of the employer and average employee salaries. The SHOP also ensures that participating small group health plans have been certified to meet minimum standards for the adequacy and quality of coverage. All plans also must cover a similar set of benefits, and each plan will be assigned to a metal level of coverage – bronze, silver, gold, or platinum – that reflects how much protection against cost-sharing the plan provides to the average enrollee. Bronze plans expose the average consumer to the greatest amount of cost-sharing, while platinum plans provide the most protection. Bronze plans will tend to have lower monthly premiums, while the premiums for platinum plans will be more expensive.
On the SHOP website, depending on your state, you will be able to find a SHOP-registered agent or broker to assist you with choosing the right plan or you can enroll directly with an insurance company. Under some state-based SHOP marketplaces, you may be able to select and enroll in a health plan. 45 C.F.R. § 155.700 et. seq.; CMS, The Future of the SHOP: CMS Intends to Allow Small Businesses in SHOPs using HealthCare.gov More Flexibility when Enrolling in Healthcare Coverage, May 15, 2017).
I’m a small business owner. Can I qualify for a tax credit to buy insurance?
The small business tax credit is generally only available with SHOP coverage, which you can purchase through an agent, broker or health insurance company or directly through some state-based marketplaces. However, small businesses with a principal address in a county with no SHOP plans available can claim the small business tax credit by offering qualifying health insurance coverage that meets certain federal requirements (see here for more information).
To qualify for a small business health insurance tax credit, you must cover at least 50 percent of premiums for your employees (not including dependents) and have fewer than 25 full-time employees whose average annual wages are less than $56,000 in tax year 2020. Eligible employers can only claim the tax credit for two consecutive years. Employers who are not tax-exempt are eligible for a higher tax credit than employers who are tax-exempt. For more information on how to calculate eligibility for and the amount of the small business health care tax credit, see this reference from the Internal Revenue Service. Small businesses can claim the credit on your annual income tax return, using Form 8941. Tax-exempt employers can claim the tax credit as a refundable credit by filing Form 990-T with an attached Form 8491. (IRS, Small Business Health Care Tax Credit and the SHOP Marketplace; IRS, 2021 Instructions for Form 8941).
I own my own business and have no employees, what are my options?
While you are not eligible to purchase small group health insurance or SHOP coverage in most states, you can purchase individual market coverage and may be able to qualify for financial assistance through the health insurance marketplace for individuals. Note, however, that some states may allow you to purchase small group health insurance as a “sole proprietor.”
To find out if your state allows business owners with no employees to enroll in small group coverage, check with your state’s insurance department
(42 U.S.C. § 18024; 45 C.F.R. § 144.03 (definition of “small employer”)).
I work full time for a small business (fewer than 50 employees). Does my employer have to offer me health benefits?
No, small businesses are not required to offer health benefits to either full-time or part-time employees, or to their dependents. Small businesses are not subject to tax penalties when they don’t offer health benefits. If your small employer doesn’t offer health benefits, you (and your family) can apply for coverage in the marketplace and you can apply for premium tax credits that may reduce the cost of coverage in the marketplace. Subsidies are calculated based on the price of available plans and household income; lower income individuals are eligible for greater subsidy amounts. Some higher income individuals may not receive subsidies. (26 C.F.R. § 1.36B-2).
Stay tuned for more FAQs throughout the open enrollment period, and check out our Navigator Resource Guide for over 300 FAQs and other enrollment resources.