What is the definition of a Small Employer under Health Care Reform?

(1) “Small employer”

(q)means

(A) … any person, firm, proprietary or nonprofit corporation, partnership, public agency, or association that is actively engaged in business or service, that, on at least 50 percent of its working days during the preceding calendar quarter or preceding calendar year, employed at least one, but no more than 100, eligible employees, HR 1624 Info the majority of whom were employed within this state, that was not formed primarily for purposes of buying health benefit plans, and in which a bona fide employer-employee relationship [Common law employee * Spouses don’t count] exists.

In determining the number of eligible employees, companies that are affiliated companies and that are eligible to file a combined tax return for purposes of state taxation shall be considered one employer.  Insurance Code §10753 

See rule and SB 1375 about the prohibition of Association Group Plans 

Self Employed?

Self employed owners of a small business must have at least one non spousal, w-2 employee to qualify as a group.   

If you do have a non spousal employee on payroll, click here to get an Individual & Family quote.    Under ACA/Obamacare your coverage is  STILL guaranteed issue with no pre-existing condition clause.

If your business isn’t as profitable as you’d like it to  be, you can qualify for subsidies under Obamacare, it’s a function of MAGI – Modified Adjusted Gross Income, Line 37 on your 1040 tax return.

The premiums for self employed are still deductible, line 29 of your 1040, learn more, whether you have an Individual Plan or a Group Health Premiums under Section §106 IRC.  As long as the plan is for employees and if you have them, you’ll have to cover them to get the tax deduction.

US News & World Report 11.28.2014 on advantages for self employed under Health Care Reform – Note though that in CA under AB 1672 – Self Employed could always get coverage!.

Tax Advantages

Schedule C – Line 12 Biz Income or Loss,

Line 29 Health Insurance Premiums,

Line 37 Adjusted Gross Income,

MAGI Income

Home Office Deduction

Tax Credits Small Business §45 R

1040 Tax Return – Schedule 1 Line 29 – 16
Self Employed Health Insurance Tax Deduction

Schedule 1 additional income & adjustment

Self-employed health insurance deduction.

You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family.

How to figure the deduction.  Generally, you can use the worksheet in the Instructions for Forms 1040 and 1040-SR to figure your deduction. However, if  any of the following apply, you must use the worksheet in chapter 6 of Publication #535.

• You have more than one source of income subject to SE tax.
• You file Form 2555 (relating to foreign earned income).
• You are using amounts paid for qualified long-term care insurance to figure the deduction.

Use Publication #974 Premium Tax Credit instead of the worksheet in the Instructions for Forms 1040 and 1040-SR if the insurance plan established, or considered to be established, under your business was obtained through Covered CA - no extra charge to use an agent  and you are claiming the premium tax credit. Publication 334 *

 

Instructions  & Form 1040

Schedule 1, * Line 29 Instructions

Check each companies underwriting manual

See the Administrative page from our Carriers Page or check our site map  

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Instant Quotes, Details and ONLINE Enrollment 

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A new law requires companies to include full-time and full-time-equivalent employees when determining group size

On January 1, 2016, California state law went into effect which redefined “small employer” to include groups of up to 100 employees. The determination of employer group size must be made annually and groups must adhere to the method for counting full-time employees and full time equivalent employees outlined in Section 4980H(c)(2) of the Internal Revenue Code. The definition of large group requires the group to have a combined total of at least 101 full-time and full-time-equivalent employees.

An example of how to determine whether a company is a small group for the purpose of purchasing group coverage is provided below. The methodology considers both full-time employees and full-time-equivalent employees.

  • Company Y has 40 full-time employees for each calendar month during 2015.
  • Company Y also has 20 part-time employees for each calendar month during 2015, each of whom has 60 hours of service per month.
  • Now, combine the hours of service of the part-time employees for a month: [20 x 60 = 1,200].
  • Dividing the combined hours of service of the part-time employees by 120* equals 10 [1,200/120 = 10]. This number, 10, represents the number of Company Y’s full-time equivalent employees for each month during 2015.
  • Company Y adds up the total number of full-time employees for each calendar month of 2015, which is 480 [40 x 12 = 480].
  • Company Y adds up the total number of full-time equivalent employees for each calendar month of 2015, which is 120 [10 x 12 = 120].
  • Company Y adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50].

In this example company Y meets the size criteria for a small group because the total number of full-time and full-time equivalent employees for at least 50 percent of the preceding calendar year equals 50. Groups must consider additional IRS rules in making their final determination of whether the group is large or small, and some exceptions may apply.

On the Master Group Application for Small Business be sure to fill in Section 2, #8f. (In the scenario above, the number to fill in is 50 FTE and FTE Equivalent.) See the highlighted areas of section 2, page 2 of the application below.

We’re here to answer any questions you may have. Please call Producer Services at (if you have any questions.

* The number of 120 is stipulated by Internal Revenue Code 4980H(c)(2): “. . . in addition to the number of full-time employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120”.

anchor 10753g

Technical Stuff

AB 1083  Bill Analysis  6.27.2011.senate   5.3.2011
Item # 5 in
8.30.2012 bill analysis ends choice for self employed to go into exchange as a group.

ORIGINAL….  18) Permits a self-employed individual with specified income to, at his or her discretion, enroll in the Exchange as an individual rather than a small employer.   [This is the 1st of 18 or so bill analysis posted on http://leginfo.legislature.ca.gov ]

Amendment to 10700 w —- (3) On or after January 1, 2014, a self-employed individual who obtains at least 50 percent of annual income from self-employment as demonstrated through personal income tax filings for the current or prior year. To the extent permitted under the federal Patient Protection and Affordable Care Act (Public Law 111-148) and any rules or guidance issued consistent with that law, a self-employed individual whose modified annual gross income is anticipated to be less than 400 percent of the federal poverty level may at his or her discretion seek to enroll as an individual rather than a small employer through the California Health Benefit Exchange.

More on definition

This subparagraph shall be implemented to the extent consistent with PPACA, except that the minimum requirement of one employee shall be implemented only to the extent required by PPACA.

(2) For plan years commencing on or after January 1, 2014, the definition of an employer, for purposes of determining whether an employer with one employee shall include sole proprietors, certain owners of “S” corporations, or other individuals, shall be consistent with Section 1304 of PPACA.

The term “small employer” means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year.] [42.usc.18024.b 2 def.employER  (1304

The  definition of Small Employer no longer includes self employed, Partners, Sole Proprietors & S Corps unless there is at least one common law employee.  Since everything will be guaranteed issue for 1.1.2014 it’s OK as the one man shop or husband & wife group can get coverage as individuals regardless of health status.  It should also be a tax write off.  If the business isn’t making that much $$$ there are Tax Subsidies Health Care Reform —  Non Grandfathered Plans * AB 1083Insurance Code §10753   

HR 1624

51 to 100 yes or no?

§10753  (q) (1) “Small employer” Health Care Reform —  Non Grandfathered Plans  AB 1083  means either of the following:

NOPE – See HR 1624 Below!!!  However, CA could do it on their own

For plan years commencing on or after January 1, 2016, any person, firm, proprietary or nonprofit corporation, partnership, public agency, or association that is actively engaged in business or service, that, on at least 50 percent of its working days during the preceding calendar quarter or preceding calendar year, employed at least one, but no more than 100, eligible employees,

[Blue Cross FAQ’s 4.14.2015]  There might be large premium increases as these groups go into the Small Group Market – where rating factors are limited and may lose large group purchasing power, discounts and group’s experience. Blue Shield Bulletin 7.9.2015    Click here for our Excel census form for your FREE Quote in CA or enter it ONLINE.

Blue Shield FAQ’s

[Some companies say one employee who could waive off if they have other group coverage and others say a common law employee MUST enroll.  Email us [email protected] for a specific answer in your situation.  See Participation Requirements]

Legislation might be coming to change this  CA Healthline 9.21.2015

HR 1624 just passed  – President Obama just signed it CA Healthline 10.8.2015   Background CA Health Line 9.21.2015

SB 125 – CA adopts FT/FTE method to determine small group eligibility, same as ACA

Kaiser 10.8.2015 Agent Bulletin,  CAHU  and CA Healthline 10.20.2015  Health Net   says definition already set in CA under AB 1083 and they are going ahead with the transition of 51 to 100 to Small Group.

7 comments on “EmployER Definition – Health Care Reform

  1. Husband, Wife & Daughter?

    Both my wife and I have S-Corps, my wife has been operating for over 10 years. I recently became an S-Corp. (We both work a psychotherapists).

    My wife’s S-Corp has three employee currently. I am an employee as well as as our daughter.

    ***Since you have a non-spousal employee, your daughter we may be able to do it.

    We are all paid thru the S-corp.

    Can we qualify for health insurance as a small business?

    ***Since you have a non – spousal employee, it should be good.   Please send your DE 9 and whatever proofs you have handy to show you are a business.

    We were able two year ago.

    Has the law changed?

    ***Yes!! Here’s details.   I have your census information, if you want a quote just let me know.  Website visitors can enter their census here both online and excel for quotes 24/7.

    Thank You

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