Covered California Small Business
The exchange is a marketplace where consumers can purchase group health insurance coverage and potentially qualify for tax credits from the government. Plan benefits and pricing on Covered California Small Business plans are negotiated between the state exchange and the carriers who are in the exchange. In 2016, small business owners with 100 or fewer full-time equivalent employees may enroll for a Covered California Small Business plan.
Pros and Cons of the Covered California Small Business
Multiple carriers will be available and pricing will be the same both inside and outside of Covered California for small business. So what are the advantages and disadvantages of buying group health insurance coverage through the Covered California Small Business program?
Advantages of Purchasing a Covered California Small Business Plan
The main advantage of purchasing a Covered California Small Business plan is that it allows small groups to choose up to two levels of coverage while allowing employees choose from multiple carriers. Employers benefit from single billing for medical and dental.
Another advantage of purchasing a group plan through Covered California is that some employers may qualify for tax credits. Small business tax credits help offset the employer’s cost for providing health benefits to employees. The amount of the tax credit will vary based on the size of the company and the employer’s contribution towards the premium. The maximum tax credit is 50% of the employees’ premiums, except up to 35% for non-profit companies. To qualify, the employer must purchase group insurance through Covered California, there must be fewer than 25 full-time-equivalent employees, the employer must contribute at least 50% of the employee-only premium, and the average annual income of the employees must be less than $50,000. For companies with fewer than 10 full-time equivalent employees and employees with an average annual salary of less than $25,000, the maximum of 50% tax credit will apply.
Disadvantages of Purchasing a Covered California Small Business Plan
There will be fewer carriers and less plan options available on Covered California Small Business. Plans offered in the marketplace must be priced the same as the same plan outside; however, carriers will be allowed to offer more plans outside the Exchange. Generally, the health plans that will be available outside of the exchange will include higher deductibles and lower premiums, so exploring plan options outside of Covered California may be especially helpful for small businesses that are looking to save money on their monthly premiums.
Note Regarding Grandfathered Plans
For those on grandfathered plans, it is most likely not to your advantage to switch to a Covered California Small Business plan. Click grandfathered plans for more information.