Health insurance is certainly one of the most important considerations for any American. Not only is having health insurance necessary to get critical medical access, but it is also essential to keep health costs low.
Thus, it is no surprise that employees are often particular about health insurance benefits when considering a job.
While many businesses generally offer some form of health insurance as an incentive to employees, not every business is legally required to. As a business owner, it is vital that you’re aware of your business’s legal obligations as it may relate to health insurance.
Thus, in this article, we will be considering whether you are obligated to provide health insurance to your employees as an LLC. Let’s dive right in:
What is an LLC?
An LLC refers to a limited liability company. This is a business structure which limits the liability of the owner(s) of the business with regard to business obligations such as debt.
In essence, their personal assets are treated as separate from business assets. Similarly, since the LLC is regarded as a standalone legal entity, it can sue and be sued. You can set up an LLC by yourself or use an LLC service to do it for you.
Another distinctive feature of the LLC company structure is that it allows for pass-through taxation. This means an LLC is not treated as a separate entity for tax purposes and, as such, can’t pay taxes as a business entity.
Instead, the owners report the business’s income and losses on their personal income tax returns. Accordingly, the taxes due to the business are passed through to the owners, who pay these taxes on a personal level. This tax structure is unlike corporations which pay their taxes as standalone entities.
Is an LLC legally required to provide health insurance for employees?
Well, it depends. Some LLCs certainly meet the qualifications of businesses required by law to provide health insurance to employees, while some don’t. The key determining factor is the number of employees the LLC has.
According to the Affordable Care Act (ACA), businesses that employ 50 or more employees and full-time equivalent employees must offer affordable group health insurance that includes essential benefits. Failure to comply with this would attract a penalty. In essence, the ACA requires every business, save for small businesses, to provide health insurance to their employees.
Of course, small businesses, by the definition of the ACA, refer to businesses with fewer than 50 full-time employees or equivalent employees. It is worth noting that the number of employees an LLC can have is unlimited.
Hence, an LLC’s total number of employees may be less or more than 50. Depending on the case, such an LLC may or may not be required to offer health insurance.
Whether your LLC is legally required to offer health insurance or not, you might want to consider offering it regardless. This is because there are numerous advantages to providing health insurance benefits.
How to get health insurance for your employees?
There are a number of ways you can go about getting health insurance for your employees. Let’s consider some:
Small Business Health Options Program (SHOP):
As the name suggests, this avenue for getting employee health insurance is limited to small businesses. SHOP is a health insurance marketplace that small business owners can explore. The marketplace exists at the state level. An LLC may qualify to use SHOP if it meets the following requirements:
- Less than 50 employees
- Provides health insurance to up to 70% of total employees
- Provides health insurance to all employees that work 30 hours or more in a week
- An office/employee located in the state in question
Health insurance brokers
LLCs can also leverage health insurance brokers, essentially outsourcing the work of getting compatible group health insurance. Health insurance brokers are professionals that can help your business through the process of searching for and choosing a health insurance plan.
Private health insurance marketplaces
LLCs that don’t qualify as small businesses can get health insurance for employees through various private health insurance exchanges. Naturally, this would require evaluating available options in your state.
Furthermore, you can check out the coverage of the various plans. You can also shop health insurance quotes to ensure you get the best price.
Final Thoughts
Health insurance is undoubtedly considered an important employee benefit by both the law and Americans. As such, in addition to attracting top talent through health insurance benefits, it is crucial to ensure you are being fully compliant with your legal obligations.
