Considering Your Employee Headcount
“When should I start preparing to offer health insurance for employees?” This is a popular question from our clients, but particularly, when they are approaching pivotal employee headcount milestones. This is a big-ticket item and a key business decision. So, I’m answering it from the perspective of our clients in the Sunshine State.
At around five employees, small businesses and startups start to feel pressure to offer group health insurance. However, competitive group health plans are hard to come by at this headcount. In the absence of competitive group health options, employers sometimes offer health reimbursements. Employees would then have to go to the private market to secure health insurance.
At this headcount level, you are not required to offer health insurance to employees.
Internal pressures include collective feedback from employee surveys or exit interviews. External pressures can come from competitors that offer full group health plans. Total rewards data from the job market can also affect these pressures. This data can provide information on the minimum standards required to attract candidates with health insurance.
At around 10 employees, it becomes clear that in order to retain and hire folks, you’ll need a “qualified” health benefit plan, at least partially employer-sponsored, as part of your total rewards program. Here, qualified means that the plan is an IRS-compliant “Cafeteria Plan.” You are still not required to offer health insurance to employees.
Employers may want to set up IRS Section 125 “Cafeteria plans” for health, vision, dental, and other types of group insurance. Reasons why a company would sign up for section 125 health plans include:
- Pretax (no FICA, FUTA, Medicare or Income tax withheld) employee contributions pay for premiums with a Premium-only plan
- Pretax health funds to pay qualified medical expenses with Flexible savings arrangements
- Safe harbor from non-discrimination tests when 100-or-less-employee companies contribute equally to all eligible employees’ premiums
Employees see health insurance without employer contributions as not very beneficial. They would have to pay for it in the same way as if they bought individual health insurance.
At 20 employees, private-sector companies must now comply with the Consolidated Omnibus Budget Reconciliation Act (COBRA). You are still not required to offer health insurance to employees. However, if you choose to do so, COBRA notification and administrative requirements must be observed by your company.
At 50 full-time employees (FTEs), you are now considered as an ALE (Applicable Large Employer). These ALEs are now subject to the Affordable Care Act (ACA) employer provisions, which require them to offer health insurance to 95% of their FTEs and applicable dependents. This is generally referred to as the employer mandate, which does carry fines for noncompliance at the time of this writing. The ACA defines full-time employees as those who work an average of 30 hours per week, or 130 hours a month.
What are the laws regarding health insurance for full-time employees in Florida?
There is no law in Florida that requires businesses to provide health insurance. However, ERISA, COBRA and ACA provide federal guidance for employers to maintain benefit compliance. In addition, the HIPAA privacy rule covers all employers handling health care data for employees. This is especially important for very small businesses. Their internal systems may not be set up to provide the level of health data confidentiality handling required by law.
In Florida, there are no laws that require employers to offer health benefits to employees. However, there is the Florida Statute Title XXXVII s. 627.6699 (Employee Health Care Access Act), which establishes coverage rules and more strictly defines what an “Eligible Employee” is in Florida State:
“Eligible employee” means an employee who works full time, having a normal workweek of 25 or more hours, and who has met any applicable waiting-period requirements or other requirements of this act. The term includes a self-employed individual, a sole proprietor, a partner of a partnership, or an independent contractor, if the sole proprietor, partner, or independent contractor is included as an employee under a health benefit plan of a small employer, but does not include a part-time, temporary, or substitute employee.
s. 627.6699 (3) (g)
If you have people on your team whom are approaching this definition of eligible, you should start looking at securing a group health insurance plan.
Note: Self-employed individuals and company owners with more than 2% (S Corp) are not eligible for a Section 125 plan. This includes independent contractors.
What’s This About Offering Insurance to Adult Children Up to the Age of 30?
Yes, it’s true. The Affordable Care Act has specified that age to be 26, meaning, if the policyholder’s plan covers children, children can remain insured until they turn 26. The new rules in Florida Statute 627.6562 take that a step further by moving that age to 30. The letter of the statute states:
627.6562 Dependent coverage.— (1) If an insurer offers coverage under a group, blanket, or franchise health insurance policy that insures dependent children of the policyholder or certificateholder, the policy must insure a dependent child of the policyholder or certificateholder at least until the end of the calendar year in which the child reaches the age of 25, if the child meets all of the following:
Source: Florida Statute 627.6562
(a) The child is dependent upon the policyholder or certificateholder for support.
(b) The child is living in the household of the policyholder or certificateholder, or the child is a full-time or part-time student.
(2) A policy that is subject to the requirements of subsection (1) must also offer the policyholder or certificateholder the option to insure a child of the policyholder or certificateholder at least until the end of the calendar year in which the child reaches the age of 30, if the child:
(a) Is unmarried and does not have a dependent of his or her own;
(b) Is a resident of this state or a full-time or part-time student; and
(c) Is not provided coverage as a named subscriber, insured, enrollee, or covered person under any other group, blanket, or franchise health insurance policy or individual health benefits plan, or is not entitled to benefits under Title XVIII of the Social Security Act.
(3) If, pursuant to subsection (2), a child is provided coverage under the parent’s policy after the end of the calendar year in which the child reaches age 25 and coverage for the child is subsequently terminated, the child is not eligible to be covered under the parent’s policy unless the child was continuously covered by other creditable coverage without a gap in coverage of more than 63 days.
(a) For the purposes of this subsection, the term “creditable coverage” means, with respect to an individual, coverage of the individual under any of the following:
1. A group health plan, as defined in s. 2791 of the Public Health Service Act.
2. Health insurance coverage consisting of medical care provided directly through insurance or reimbursement or otherwise, and including terms and services paid for as medical care, under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance contract offered by a health insurance issuer.
Insurers are required to offer this option to extend the child’s insurance, given that the insured children satisfy the aforementioned requirements, but confirm the eligibility with your benefits agent or the carrier before employees let the 26th birthday passes without taking action on their insured children. As a solid practice, send notifications to employees at least a month ahead of the 26th birthday, and again for insured children turning 30. This will give the employees an opportunity to make arrangements in advance.
If I offer health insurance to one person, do I have to offer to all employees?
Yes, you are required to offer health insurance to all eligible employees if you offer it to one person. It is recommended to have a clear policy on who is eligible for health insurance. This policy should be communicated to your employees. This should match the plan documents from the insurance carrier and the Florida Statute defines as eligible. Discrimination claims can arise if a company offers healthcare to only select employees.
Note: If you offer health benefits to one employee, you may be subject to certain nondiscrimination rules under the ACA. These rules prohibit employers from discriminating in favor of highly compensated employees when it comes to health insurance benefits.
Communicate the benefits journey to your employees
Employer-sponsored health benefits can be a powerful tool to attract and retain employees. Let your staff know your intentions regarding offering benefits. Wherever you are in your journey to make this happen, communicate your plans. Establish policies ahead of your first open enrollment. Finally, post the most updated workplace benefit-related posters in the work bulletin for your company.
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