Part-time Employees and Health Insurance

Since the ACA changes, we field many questions regarding part time employees.

For good reason.

Part time employees are affected by the ACA law changes in many ways.

In fact, whether a company has to offer health insurance or pay a penalty can be affected by part time employees!

So let's dive right in and look at the various affects of the law.

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General guidelines for part time employees

First, let's start with the basics.

Part time is generally less than 30 hours/week.

Some carriers have minimum hourly requirements (for example 15 hours/weekly)

The period is generally the prior payroll report.

For new enrolling groups, it can be the quarterly payroll report to the State.

For the FTE calculation (more on FTE later), you actually look at the prior year's payroll information.

1099 are not considered employees and do not figure into the calculation.

Coverage is not required for part-time employees although their hours figure into the Pay or Play requirement described below.

Okay...we have our basic housekeeping done. Let's get into the changes of the ACA law.

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Requirements to offer health insurance based on FTE's

Before the ACA law, part timers didn't really figure into any eligibility requirements.

They do now.

The big change in the law is that certain companies must offer group health insurance or pay a penalty.

The so-called Pay or Play rule.

Which companies are affected?

Those with 50+ FTE's or Full Time Equivalents.

This is new since the ACA law.

So what is an FTE and how to do part time employees figure in?

The law wanted to make sure that companies didn't fire people or just knock down full time employees to part-time in order to avoid the requirement to offer coverage.

Hence the FTE.

What is the FTE and how do you calculate?

Full time employment is considered 30+ hours per week.

We first add up all our Full time employees with 30+ hours.

Next, we take the total hours of our part time employees and divide by 30.

We then add the Full time employees to the Part Time equivalents for our total FTE.

For example, let's say we have 30 full time employees and 40 part time employees at average of 15 hours/week.

That's an FTE of 50

It's 30 full time employees and then 40 x 15 / 30.

It's as if the 40 employees at 15 hours are equivalent to 20 hours at 30.

This is a big deal.

Companies are used to not considering part time employees in terms of health insurance.

Now, in the situation above, we do not need to offer part time employees but because of their impact via the FTE, we do have to offer coverage to the 30 full time employee or pay a penalty.

Find out more on the Pay or Play penalty for Business.

So part time employees affect our group health requirements which is a big deal.

What about coverage for part-time employees themselves?

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Health coverage for part time employees

California companies are not required to offer health insurance to part time employees.

They can if they want to....but they are not required to.

What are the options for part time employees to get health insurance?

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Part time employee health insurance options

First, as a company, make sure not to offer to pay towards an employee's individual health plan (even through Covered California).

The IRS has announced massive penalties for doing so.

Penalty of $100/day/employee up to $36,500 per year!

July of 2015 resulted in a pretty serious and straight forward warning to California companies that do this.

A company doesn't even want to say that pay is in lieu of health insurance or "pick a plan and we'll contribute up to $400 towards it", etc.

If a company does not offer group health benefits, it's pay only.

No gray area between the two.

There are 100's of 1000's of California companies who do not know about this penalty yet.

Some do know and are playing a game of chicken with the IRS.

We don't like those odds especially since such a drastic penalty is designed to send a strong warning.

If you a company is unable to offer group health insurance (cost, eligibility, etc), you can direct them to us and we'll quote all available options through Covered California.

We can even get the tax credit if they are eligible.

In fact, 50% of the self-enrolled accounts have wrong info.

We'll make sure they get the right tax credit available.

This avoids having to pay it back at tax time or not getting the full monthly amount.

There's no cost for our services at 866-486-6551. Individual/family quotes can be run here with tax credit calculation.

If you want to quickly quote a Group health plan including part time employees, just request the proposal and there's no cost to you..

Call us at 866-486-6551 or request your Company Health Quote.