Under the Affordable Health Care Act (ACA), companies employing 50 or more full-time employees (FTEs) that do not offer health insurance or offer health insurance that does not meet certain minimum standards may be subject to a financial penalty, known as payment for shared responsibility of the employer. Are California employers required to provide health insurance?
There is currently no state law obliging employers to offer group health insurance to employees, but most employers provide this benefit. If your employer provides health insurance, California insurance law requires policies that cover certain benefits (mandatory benefits) and give employees the right to continue group insurance under certain circumstances if the employee leaves the group. Additional information about follow-up requirements is available.
Tax benefits for your company
In general, all expenses incurred by the employer in connection with health insurance (for employees or dependents) are 100% deductible as normal business expenses, both in California and federal income taxes. In addition to this general principle, taxes are becoming a little more complicated. It is possible to configure employees to save taxes. A small formality on your part is enough for the employee to cover health insurance costs on a pre-tax basis. This means that you deduct the cost of the premium from the employee’s payment before calculating and deducting state and federal taxes. This increases the employee’s remuneration and reduces the amount of taxable income.
Bad health care can affect morality, performance and business success
If your employee cannot get physical therapy after an accident or needs medical help to prevent serious future health problems, this will affect your daily activities. Almost every employer has a story. We won’t spend too much time on it, but you can see the basic reasons why an employer offers group health insurance, even if it’s not required.
Let’s look at what the law says about employers who have over 50 full-time equivalents.
Employers can meet their health spending obligations in a number of ways:
- Payments to a health insurer to provide protection to insured employees;
- Contributions on behalf of employees covered by the insurance to the healthcare expenditure account, such as a healthcare reimbursement contract, flexible expenditure account or a healthcare savings account;
- Cash refunds to employees covered by expenses incurred for the purchase of healthcare services, such as medical and pharmacy bills;
- Paying directly to a health care professional for services rendered to insured employees.