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 

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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.

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* 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”.

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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.

Child & Related Pages

AB 1672 – (1992 to 2013) Small Group Health Rules prior to Obamacare

Health Insurance Deduction Line 29  for self employed

Schedule C – Line 12 Biz Income or Loss,  Line 29 Health Insurance Premiums,  Line 37 Adjusted Gross Income,   MAGI Income

Home Office Deduction

Self Employed Deduction for S Corp Owners

Details on Obamacare Subsidy and Line 29 deduction

Self Employed – New Definition under Health  Care Reform – Introduction

 

Here’s what they were under AB 1672 – 1992 – 2014

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.

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