Does Your California Business Qualify for Small Group Health Insurance?

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“Small employer” definition in California Insurance Code:

(q)means …

(A) … any person, firm, proprietary or nonprofit corporation, partnership, public agency, or association that is actively engaged in business or service, that, on at least 50 percent of its working days during the preceding calendar quarter or preceding calendar year, employed at least one, but no more than 100, eligible employees, ^{HR 1624 Info} the majority of whom were employed within this state, that was not formed primarily for purposes of buying health benefit plans, and in which a bona fide employer-employee relationship ^{[Common law employee * Spouses don’t count]} exists.

In determining the number of eligible employees, companies that are affiliated companies and that are eligible to file a combined tax return for purposes of state taxation shall be considered one employer.  ^{Insurance Code §10753} 

See rule and SB 1375 about the prohibition of Association Group Plans

More on definition

…

This subparagraph shall be implemented to the extent consistent with PPACA, except that the minimum requirement of one employee shall be implemented only to the extent required by PPACA.

(2) For plan years commencing on or after January 1, 2014, the definition of an employer, for purposes of determining whether an employer with one employee shall include sole proprietors, certain owners of “S” corporations, or other individuals, shall be consistent with Section 1304 of PPACA.

The term “small employer” means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year.] ^{[42.usc.18024.b 2 def.employER  (1304}

The  definition of Small Employer no longer includes self employed, Partners, Sole Proprietors & S Corps unless there is at least one common law employee.  Since everything will be guaranteed issue for 1.1.2014 it’s OK as the one man shop or husband & wife group can get coverage as individuals regardless of health status.  It should also be a tax write off.  If the business isn’t making that much $$$ there are Tax Subsidies.  ^{Health Care Reform —  Non Grandfathered Plans * AB 1083 * Insurance Code §10753}   

Employee or 1099 Independent Contractor?

Self Employed?

• Self employed owners of a small business must have at least one non spousal, w-2 employee to qualify as a group.   
• If you do have a non spousal employee on payroll, click here to get an Individual & Family quote.    Under ACA/Obamacare your coverage is  STILL guaranteed issue with no pre-existing condition clause.
• If your business isn’t as profitable as you’d like it to  be, you can qualify for subsidies under Obamacare, it’s a function of MAGI – Modified Adjusted Gross Income, Line 11 on your 1040 tax return.
• The premiums for self employed are still deductible, line 29 of your 1040, learn more, whether you have an Individual Plan or a Group Health Premiums under Section §106 IRC.  As long as the plan is for employees and if you have them, you’ll have to cover them to get the tax deduction.
• US News & World Report 11.28.2014 on advantages for self employed under Health Care Reform – Note though that in the past CA under AB 1672 – Self Employed could always get coverage!.

Tax Advantages

• • Tax Credits Small Business §45 R
    • IRC §106 Health Insurance Deduction for Employers & Employees
      • Schedule C – Self-Employment Income – Hobby? Office in home?
  • healthcare.gov/self-employed

See our other pages on Employer – Employee Definition

• EmployER Definition – Health Care Reform
• EmployEE Definition
  • 1099 vs Employee & Other Defintions

Proofs you meet definition of Small Group Employer?

Participation & Premium Contribution Requirements

• Documents to show bonafide Employer in business
• Management Carve Outs – §2716 – Similarly Situated
  • Common Ownership – Affiliated Companies – Corporations

FAQ’s

• My wife and I own an S Corp. So, since we are employees, that makes us eligible to get a group plan, right?
  • See links above for proofs needed to prove your a bonified business with #  and the sample underwriting guide and administrative manual.
  • How about a child who is an actual w-2 employee?

We want UCLA

Here are the Group Plans that we can get you that UCLA shows as accepted on their website

What is a #bona fide employer – employee relationship?

• Health Care Reform requires that one have a bona fide employer – employee relationship at common law, not husband & wife.  Even if you had a group plan prior to ACA.
  • See our page on 1099 Independent Contractors vs Employees & Owners

What is that?  Why?

Legal Reasoning

I’ll grant, that I have trouble completely following the logic given to me by Covered CA, but I have to acknowledge that every Insurance Company agrees.

 Dear Steve,

• only a small employer new definition of Small Employer   §10753  (q) (1)   may participate in the SHOP Small Employer Program Covered CA. 45 CFR 155.710:
• “Small employer” and “employer” are defined with reference to Section 2791 [300gg-91] of the Public Health Service Act.
• Employer has the meaning given to the term in section 2791 of the PHS Act, except that such term includes employers with one or more employees. All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Code are treated as one employer.  CFR § 155.20.
• (a) (6) EMPLOYER .—The term ‘‘employer’’ has the meaning  given such term under section 3(5) of the  Employee Retirement Income Security Act of 1974, except that such term shall include only employers of two or more employees. ^{Page 1533 Public Health Service Act}
  • (d) other definitions
     
    (5) Employee The term “employee” has the meaning given such term under section 3(6) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1002 (6)].
    (6) Employer The term “employer” has the meaning given such term under section 3(5) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1002 (5)], except that such term shall include only employers of two or more employees.  300gg-91.
  • Under Section 2791, “employer” is defined by reference to ERISA Section 3(5).  [29 US Code §1002 Definitions]
  • (5) The term ‘‘employer’’ means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.
  • (6) The term ‘‘employee’’ means any individual employed by an employer.  Page 9 ERISA.
  • ERISA Section 3(5) requires that an employer employ at least one common law employee (i.e. someone other than the owner).
  • IRS  Common Law Employee
    • Worker Classification 20 Factors
  • Ascende Human Capital Consulting
    • Our Website on Employee vs 1099 Independent Contractor
• Under 29 C.F.R. 2510.3-3(c), a regulation adopted under ERISA, an employee does not include a sole proprietor or the sole proprietor’s spouse, or a partner in a partnership or the partner’s spouse. See also 77 Fed. Reg. 18399 (Mar. 27, 2012).    ^{(legal reasoning courtesy of Covered CA Facebook inquiry)     SHOP Agent Guidelines}

 How many common law employees must be enrolled for coverage to be considered group coverage?

• A. For a group health plan to be considered a “group health plan” under the Employee Retirement Income Security Act (ERISA), there must be at least one common law employee enrolled.
• Pursuant to 29 C.F.R. 2510.2-3(b), an “employee benefit plan” does not exist if no “employees” are covered by the plan. Pursuant to 29 C.F.R. 2510.3-1 and 29 C.F.R. 2590.732(d) an “employee” does not include the sole owner of a business or a spouse of the business owner. New York.gov

See our other pages on Employer – Employee Definition

• EmployER Definition – Health Care Reform
  • 1099 vs Employee & Other Defintions
  • EmployEE Definition
    • COBRA & California Cal-COBRA 36 months total coverage
    • Dependent Definition – Up to Age 26 – Add newborn baby
      • Registered Domestic Partners – Spousal Health Coverage?
• Participation & Premium Contribution Requirements
  • Documents to show bonafide Employer in business
  • Management Carve Outs – §2716 – Similarly Situated
    • Common Ownership – Affiliated Companies – Corporations

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• Healthcare.gov  
• If you’re self-employed with no employees, you’re not considered an employer. You can use Covered CA  or Direct with Insurance Company to find coverage that fits your needs.
• sole proprietors and owners of S Corp   – (Does not pay Federal Income Tax) can be small groups as long as the one employee is not the sole proprietor or their spouse ^{blueshieldca.com}
• • 3. Additional attestation for establishing minimum group size:
    a. If my eligibility is required to meet the minimum group size to qualify for small group business coverage, I additionally attest that:
     
    I do not wholly own the above-named company with my spouse or on my own  ^{BC eligibility statement}
• C Corp  separate legal entity owned by shareholders
• S Corp   – Does not pay Federal Income Tax
• Blue Shield Flyer Small businesses and the ACA Rev 3.2013 Michael Lujan was very explicit in 2 presentations to CAHU and LAAHU, an EE is someone who is listed on a DE 9C.  Sole Proprietors and partners are normally not on a DE9C.  The sole prop and partner can be included in a group plan IF they have at least one W2 EE listed on the DE9C.

Resources & Links

• §31.3401(c)-1   Employee.
  • (b) Generally the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished.
  • That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so.
  • The right to discharge is also an important factor indicating that the person possessing that right is an employer.
  • Other factors characteristic of an employer, but not necessarily present in every case, are the furnishing of tools and the furnishing of a place to work to the individual who performs the services.
  • In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is not an employee.
• See our webpage on Employee vs 1099 Contractor