Small businesses are the backbone of the American economy and one of the best ways for small businesses to excel in their vertical is to offer health insurance benefits to their employees. Colorado has one of the country’s strongest economies due to its unprecedented population growth over the last decade. Small businesses, defined as having fewer than fifty full-time equivalent employees, often cite cost as the main reason they do not offer health insurance benefits. The other reason is uncertainty about the processes and requirements required for first-time insureds. Small businesses gain a competitive advantage when they offer health insurance and other employee benefits because it allows them to attract and retain the best talent. Here are the five things all Colorado small business owners need to know before starting to investigate health insurance options.
1.) You May Qualify for a Health Insurance Tax Credit
If your Colorado small business qualifies, you can receive a tax credit of up to 50% of the premium cost your company invests into its employee health insurance plan. The requirement to qualify is that your average employee’s annual income cannot exceed $56,000.00 per year (2023 data.) The program is designed to encourage small businesses to provide health insurance while offsetting a portion of the cost. The lower the average income of the employees, the more significant the size of the tax credit. The number of employees is also a factor. For the maximum tax credit amount to be applied the employer has to have less than ten employees with an annual average salary of less than $27,000.00 per year. The employer also has to pay for at least 50% of the premium costs for the small group health insurance plan. In Colorado, the only carrier currently participating in the program is Kaiser Permanente. If your small business health insurance Colorado plan is with any other carrier you will not qualify for the tax credit. The credit is available for the first two consecutive years of the group health insurance plan.
2.) Colorado’s Mini C.O.B.R.A. Law
The Consolidated Omnibus Budget Reconciliation Act or C.O.B.R.A. allows former employees to continue and stay on a company’s health insurance plan for up to 18 months as long as they pay their own premiums. Federally, this law does not apply to small businesses with fewer than 20 employees. In Colorado, this requirement is extended to all small businesses. Self-funded plans and Federal plans are excluded. Within ten days of termination, all small businesses must provide their former employees with written notice of their right to continue coverage, the payment instructions, the monthly premium amount, and the consequences of non-payment must be included in the notice. The employee must have had continuous coverage on the small group health insurance plan for six months to qualify and employees that were dismissed due to gross misconduct are not eligible for this program.
3.) You Will Need to File an Additional I.R.S. Tax Form
Your small business will have to file additional I.R.S. Forms when you provide health insurance for your employees. Most small businesses have a C.P.A. or tax professional to help them with their year-end taxes. I.R.S. forms 8491, 1095A, 1095B, and 1094B, and possibly others may need to be filed. The correct forms will depend on whether or not you applied for a tax credit, the type of health insurance you offered, and the size of your small business. If you are not going to use a CPA and try to tackle this juggernaut yourself, make sure to familiarize yourself with all of the IRS forms before filing your return.
4.) Information You Must Provide Employees to Remain Compliant
There is specific documentation that all businesses that provide group health insurance benefits must provide for their employees. This includes a Summary of Benefits and Coverage (SBC) form. This document outlines what the health insurance plan costs and what the plan covers and is provided by your insurance carrier. Employers must also report the cost of coverage on their employees’ W-2 forms if they provide employer-sponsored group health insurance. The health insurance premiums are deductible for the employer-paid portion.
5.) I.C.H.R.A.s Save Small Businesses Money
An Individual Coverage Health Reimbursement Account (I.C.H.R.A.) is an ACA-compliant alternative to employer-sponsored health insurance. This program allows the employer to pay a percentage of the employees’ monthly premium costs for their individual plan through reimbursement. The small business employer enjoys several advantages with an I.C.H.R.A. There is no minimum employee participation percentage required. Standard group plans require 75% employee participation. There is also no minimum requirement on how much the employer must reimburse their employees. It can be as little or as much as the employer wants. The employer can also reimburse different dollar amounts to employee groups based on salaried, non-salaried, part-time, full-time, etc. When it comes to pure affordability, an I.C.H.R.A. is tough to beat.