Covered CA Small Group
Who Is Eligible
Eligibility Guidelines
You are eligible for Covered California for Small Business if:
You have at least one but no more than 100 eligible employees and meet certain contribution and participation requirements.
You have at least one employee who receives a W-2.
The majority of your eligible employees live in California.
You are eligible for Covered California for Small Business if you have 100 or fewer full-time-equivalent employees.
If you are a sole proprietor, with no W-2-receiving employees, you may be eligible to purchase coverage through Covered California’s individual marketplace.
Employees who are not eligible for coverage include those employees who work less than 20 hours per week, receive a Form 1099 or are seasonal or temporary employees.
For the purposes of determining whether an employer is a small or large employer as defined by the Patient Protection and Affordable Care Act and applicable California law, the employer is required to calculate its total number of “full-time-equivalent” (FTE) employees. This number determines whether the employer is eligible to participate in Covered California for Small Business
An FTE employee is not an actual employee, but a calculation involving all part-time and full-time employees who worked during the preceding calendar year (or who are reasonably expected to work in the current calendar year if the employer did not exist in the prior year). If the final figure exceeds 100, then the employer is a large employer under California law. For coverage starting Jan. 1, 2016, if the final figure is 100 or less, then the employer is a small employer that is eligible for Covered California for Small Business.
Calculating the total FTE employee count is your responsibility as an employer.
Employers that have more than 100 FTE employees are not eligible for Covered California for Small Business.
Not all FTE employees may be eligible for coverage with Covered California for Small Business. Employees who are eligible for coverage include:
Full-time employees (those who work 30 or more hours per week).
Part-time employees (those who work 20-29 hours per week) at the employer’s discretion.
Employees who are not eligible for coverage include those employees who work less than 20 hours per week, receive a Form 1099 or are seasonal or temporary employees.
Tax Credits
Your business could be eligible for a tax credit that’s only available through Covered California for Small Business.
With Covered California for Small Business (CCSB), you decide the level of coverage and provide employees with health insurance that fits your budget. Small businesses that purchase coverage through CCSB may be eligible to receive a federal tax credit to help offset the cost of providing health insurance.
The amount of credit you are eligible to receive works on a sliding scale. The smaller your business, or the lower your annual average wage, or both, the larger your credit will be.
The maximum tax credit available is 50 percent of premium expenses as a for-profit employer. The maximum credit for tax-exempt employers is 35 percent. This credit applies to two consecutive tax years. Small businesses must purchase health insurance through CCSB to be eligible for the tax credits offered.
Your tax credit will depend on a number of factors such as:
Number of employees: The business must have less than 25 full-time equivalent employees (FTEs). Owners and immediate family members of the owner are not counted as employees when calculating the tax credit.
Average wage of employees: The employees must have an average annual wage of less than $56,000 per year. This limit has been adjusted for inflation since 2014.
Employer-paid premiums: The employer must contribute at least 50 percent of the cost of insurance coverage for each employee.
Example of a Small Business Receiving Tax credits for Health Insurance
For more details, see the Internal Revenue Service (IRS): irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace
Do you have questions? Call your broker or tax professional, or contact CCSB at (844) 332-8384 or SmallBusiness@covered.ca.gov.
*Not all businesses will qualify. To verify that your small business is eligible for a federal tax credit, please consult a professional tax adviser. The credit only applies for two consecutive tax years based on premiums paid for employees.
**Federal tax credit income limits are adjusted annually as updated IRS publications for the prior tax year become available in the first quarter of the proceeding calendar year. For example, the 2020 tax income limit will not become available until early 2021. Please refer to Form 8941: Credit for Small Employer Health Insurance Premiums for the most current information.