Covered Ca Tax Credits for Small Business


California companies are getting squeezed left and right these days.

Costs are up and despite the pundits, the economy is still treading water in many places.


And oh yes, the ACA law.


That's the 1000 page law that affects all things health insurance in the US and California.


There's plenty of that law that applies to Employer Sponsored health plans.


Most of the law brings about new taxes and requirements for companies but there is a silver lining for some.

The Tax Credit.

Let's take a comprehensive look at how to qualify.

Quick intro - the Tax Credit for Small Businesses

The drafters of the law quickly realized that the law had plenty of "requirements" so some sugar was needed for the medicine.


That's the tax credit!


It's a traditional tax credit that is taken at tax time the following year.


We're thinking


It's not that much money, is it?

Actually, it can pay up to 50% of the employee's health insurance premium.

That got a lot of people's attention.


Okay, next question we get is this:


"Yea, but how many company will actually qualify?"


You would be surprised. We were.


Don't take our word for are some of the stats...




Up to 50% of the employee's premium. 100's of thousands of eligible companies.


Millions of eligible employees.


Request your Company Quote including Tax Credit analysis here.


So how do we qualify for the Covered Ca Tax Credit?

Qualifying for Tax Credit in California


In terms of the type of company that is eligible, there are two main requirements:

  1. The employer has less than 25 full time (equivalent) employees
  2. The average salary is less than $50K


Let's break both of these down further.


25 or less employees.


The heart of the law was to help those employers who are struggling the most to offer employees health benefits.

This is the small company demographic.

Interesting fact...80% of Californians are employed by companies with 3-5 employees.

All the way up to 25 employees will cover a lot of Californian companies.


Especially the ones that need a break right now.


Quick Point


The law actually looks at 25 "full-time equivalent" employees.


What does "equivalent" mean?


It means that you take your total part time hours per week and divide by 30.   Add this to full time employees.


Even if they are not being offered health benefits.

Companies are not required to offer health insurance to part-time employees (under 30) but the total number of employees figures into the 25 or less calculation.

For example, you could have 10 full time employees and 50 part time employees.


You would likely not be eligible since the 50 part timers at 15 hours/week are the "equivalent" of 25 full time employees.


Don't fret. We can help with this. Call us at 866-486-6551 or email us at


We can quickly size up your tax credit.

There's no cost for our service as Certified Covered Ca Small Business Agents!

What period do they look at?


Think of this from a tax perspective.


The small business tax credit will be applied for at tax time.


They will look at your prior year's total hours employed to determine the 25 or less qualifier.


If you have seasonal employees or big hiring changes during the year, call us at 866-486-6551 and we go through this piece of the equation.

Again, for many Californian businesses, the 25 or less employees will be easy to meet.



What about the Salary qualifier?


Less than $50K average salary


Many of the rules above apply for the salary piece as well with a few exceptions.

First, the salary of owners (including family members) and officers do not figure into the calculation.

This can be the dealmaker (as opposed to breaker).


For example, let's say you have an owner that makes $100K per year but 5 employees that all make $30K.


This is very common.


Think of all the doctors and dentist offices out there. The garages or retailers. On and on and on.


In the case above, we can exclude the $100K since that salary is for the owner.


That leaves us with $30K average salary, close to the sweet spot for the maximum tax credit.


Calculating the average salary for tax credit eligibility


We'll use the above example.


Again, looking at it from a tax filing point of view, you'll take your total full time equivalent hours for the calendar year.


Divide this total hours by the total gross annual payroll (excluding owners/officers).


This is your per employee average salary.

If that number is under $50K, call us at 866-486-6551 right away!  Quote HERE

Keep in mind that we're always looking at the past year's average salary to claim a tax credit in April.


What Plans are Eligible for Tax Credits


Great question.


Okay, let's take a suspicious slant?


Can we actually get good plans with the Tax Credit?


The answer is...


Basically, to get the tax credit for Small Business, we need to get Business health insurance through Covered Ca


Covered Ca is essentially a market place.


Many Californians know that it exists for individuals and families.


Many Californian companies do not realize it also benefits them as well!


Currently these are the business health carriers available through Covered Ca:

  1. Blue Shield of California
  2. Kaiser
  3. Health Net
  4. Sharp
  5. Western Health Advantage
  6. CCHP


What about the rates and plans offered by these carriers.


The ACA law aimed for parity!


First, the law standardized health plans.


Whether through Covered Ca or off-Exchange (direct to the carrier):

  1. Rates must be the same in or out of Covered Ca
  2. Benefits must be the same in or out of Covered Ca
  3. Doctor networks must be the same in or out of Covered Ca


The bill crafters wanted to make sure that there was no disincentive to Covered Ca plans.

They also wanted a pretty big incentive for in Covered Ca for businesses.


The Tax Credit!


There's one more advantage for companies inside Covered Ca....


The ability to mix and match carriers and plans under one policy!


Request your Company Quote including Tax Credit analysis here.

Multiple carrier/plan offering by Metallic Level


Here how it works.


Say you have half your employees that want Kaiser.


The other half has existing doctors and relationships outside of Kaiser they don't want to lose.

Covered Ca offers a great workaround here.

As the employer, can pick a given metallic level (Bronze, Silver, Gold, or Platinum) and let the employees pick from any of the carriers in their area at that Level.

Tina takes Kaiser. Michael goes with Blue Shield. Reginald chooses Western Health Advantage.


No Problem.


The tax credit (if eligible) applies across the board. All carriers in Covered Ca.


So how does the employer protect its budget when employees are picking different plans and carriers?


Again, no problem.

An employer can designate it's monthly contribution to a given plan (say Kaiser, Silver option) or a fixed dollar amount per employee/month.

The first option usually works best since age does not put older employees at a disadvantage.


Outside of the 25 employees and $50K salary requirement, this brings up two more criteria which are true for Small Business health insurance in general.


  1. The employer must pay at least 50% of the Employee (not dependents) premium
  2. At least 75% of the eligible employees must go with the plan


"Eligible" employees is important.


It generally does not include the following:

  1. Employees on other group coverage (say through spouse)
  2. 1099 or Contract employees
  3. Part time employees are optional
  4. Employees on Medicare, Medi-cal, or other Government sponsored coverage


Important Notes: Covered Ca or individual/family plans are not an eligible waiver.

There is a special open enrollment window during which most companies that enroll regardless of participation (75%) and contribution (50%) rule.

This starts November 1st for a Jan 1st effective date.


Call us at 866-486-6551 or Request Quote HERE if you need to take advantage of this option.

Quick review on Small Business Tax Credits.


If you have under 25 employees and average salary under $50K, call us right away.


We'll run the tax credit calculation as well as the Covered Ca full quote.

There's no cost for our services as Certified Covered Ca Small Business Agents.  In fact, Covered Ca Business Enrollment must be with a Certified Agent!

All employer enrollment has to go through a Certified agent anyway. Let us help you evaluate the options.


One note...the IRS just sent notification that there is a penalty for companies that pay towards individual employee plans.


A lot of small companies in California are doing this and could be accruing a penalty of $100 per employee per day RIGHT NOW.


Let us see if we can use the tax credit to reduce the cost and still offer your employees the best value in health benefits.


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


and more

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About CaliforniaGroupHealth


Group health insurance requires a constant discipline to make sure your company has the best value on the market.  Expert and Impartial advisors dedicated to this endeavor is Invaluable

We are Certified Covered California Small Business Agents and Licensed California Group Health Agents with 20+ years of experience helping 1000's of California companies.

Call me. you will be pleasantly surprised 866-486-6551

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We'll quickly see if you have the best priced plan available and if you qualify for a tax credit


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