Are Business Owners Required to Provide Health Insurance to Employees?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jun 19, 2018

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Business owners are generally not required to provide Health insurance for employees, but The Patient Protection and Affordable Care Act (PPACA) will penalize businesses with over 50 employees that do not provide employee health insurance. This law was supposed to go into effect in 2014, but has been delayed until 2015. The fine could be as high as $3000 per worker. It is uncertain what the effect of this penalty will be, but this penalty might be less than the cost of providing employees with health insurance benefits. Many states have proposed legislation that would prohibit the new mandatory health insurance rules from applying to employers.

State and Local Laws Regarding Mandatory Health Insurance

Some states and cities have taken employee health insurance rules into their own hands. Massachusetts, for example, requires employers with ten or more employees to provide their employees with a “fair and reasonable contribution” to their employee health insurance. If employers in Massachusetts refuse to follow this rule, they may be penalized with fines of up to $295 per employee, per year. This money goes into a state fund that supports health care for low income individuals and families.

The city of San Francisco has enacted even more stringent health care reform than Massachusetts. A San Francisco health care security ordinance requires employers to spend a minimum amount of money per hour on health insurance for employees who work in San Francisco. Compliance with this ordinance is enforced by the city’s Office of Labor Standards Enforcement. States such as Vermont and Maine, have also enacted similar employee health insurance mandates that require employers to provide a contribution to their employees’ health care coverage.

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Employee Health Insurance Laws: Penalties and Benefits

If your business is not located within a city or state that has enacted health care reform, then you as an employer will not be penalized for failing to provide employee health insurance coverage until the federal health care reform takes effect in 2015. However, there are benefits to providing employee health insurance coverage. Providing coverage to your employees will make you a more desirable employer and attract employees who are more likely to make a long term commitment to your business.

Further, as of 2010, small businesses may receive up to a 35 percent credit for employee health insurance premium costs. This credit will increase to up to 50 percent on January 2014, and from there is expected to be phased out gradually. Small businesses that are just starting up now should take advantage of this health care credit and begin offering employee health insurance to attract high quality employees. Having a stable business with long-term employees will likely outweigh the costs of employee health insurance in the long run.

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