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.

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. 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).


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

Proofs Required?


 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



If you’re self-employed with no employees, you’re not considered an employer. You can use the individual Marketplace 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 DE9C.  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

Keller Benefits.com

§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.

§31.3401(d)-1   Employer.

See our webpage on Employee vs 1099 Contractor  

2 comments on “Bona Fide Employer-Employee Relationship – non spousal

  1. My business was established before healthcare reform
    so doesn’t that mean that I can still buy an employer plan
    even if it’s only my wife and I

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