Do You Have to Offer Insurance to Part-Time Employees?

If you’re running a small business, there’s a good chance you have more than one type of employee. You might have a few full-time workers, a few independent contractors, and some part-time employees. There are definitely advantages to hiring part-time workers: for example, flexible scheduling, having a few people on staff who are each specialized in different areas, and taking some of the stress off of full-time employees if their workload suddenly increases. Would you add “saving money on benefits” to that list? If you’re a small employer who chooses to offer healthcare to your full-time employees, you might wonder whether you also have to offer it to part-time employees, and if you don’t have to, whether you can – and should – offer it.

Part-Time Employees

clock drawn in chalk  on a blackboard
Under the rules set out by the Affordable Care Act (ACA), part-time employees are those who work less than 30 hours per week. 

First things first: what does being “part-time” actually mean? You might have your own definition for the purposes of your business, like someone who works fewer than 35 hours per week, but when it comes to healthcare, there is actually a legal definition of part-time. Under the rules set out by the Affordable Care Act (ACA), part-time employees are those who work less than 30 hours per week. 

And now the answer to those basic questions above. First: do you have to offer healthcare to your part-time employees? No, you do not have to – even if you offer it to your full-time employees. The ACA only requires that employers with 50 or more full-time – or full-time equivalent – employees offer healthcare to those employees. Remember, your part-time employees count towards your number of full-time equivalent (FTE) employees, so be sure to do the following calculation:  

  1. Add up all the hours that your part-time (less than 30 hours per week) employees work on average each week
  2. Divide the result by 30
  3. Round down to the nearest number
  4. Add that number to the number of full-time employees you have and that’s your FTE number 

If that number is fewer than 50, then you are not required to offer healthcare to any of your employees. 

Second: can you offer healthcare to part-time employees? Yes, you can, but there may be some barriers to offering it to part-time employees, and you must follow certain rules set out by the ACA.

The Rules

red prohibit sign
Some insurance companies actually prohibit you from offering your insurance policy to part-time employees.

If you do decide you want to offer healthcare to your part-time employees, there are some things you need to be aware of. First, check with your insurance carrier because:

  • Some insurance companies actually prohibit you from offering your insurance policy to part-time employees. Insurance companies make their own rules, and they may also vary on a state-by-state basis. 
  • Most health insurance companies have a minimum participation rate for plans (this may vary by state, as well). Adding your part-time employees into the mix could mean changing your minimum participation rate percentage, so make sure that your part-time employees actually want to enroll in your plan before you offer it to them!

Next, if your insurance company gives you the go-ahead, then you need to make sure that you are complying with the ACA’s rules surrounding offering healthcare to part-time employees. You have to:

  • Be consistent. Just as the ACA requires that you offer the same benefits to all similarly situated full-time employees, the same applies to part-time employees. In other words, you can’t offer healthcare to one part-time employee, but not to another who works the same number of hours and does a similar job.
  • Clearly define your policy. If you are going to offer healthcare to part-time employees, you need to have a written policy that clearly states eligibility requirements. This is completely up to you, it just needs to be implemented consistently. For example, you could set a policy that allows employees to participate in your healthcare plan if they work a minimum of 20 hours per week – all employees who meet this minimum threshold would then be eligible for your plan.

The Pros and Cons

This brings us, finally, to whether you should offer part-time employees healthcare. Well, there are a few pros and one big con: the cost. Adding employees onto your healthcare plan will mean extra money out of your pocket, since you’ll be contributing to their premiums just as you would for full-time employees. But there are also advantages to offering healthcare to all of your employees, as well as ways to help offset the costs.

group of employees talking at a table.
Advantages to offering healthcare is you will end up with happier, healthier, more productive employees

The obvious advantages to offering healthcare are the personal reasons. You’ll end up with happier, healthier, more productive employees who are not worried about the possibility of being hit with a giant medical bill. In terms of your business, you’ll be able to attract high-quality staff if you offer this coveted benefit, and you’ll be more likely to retain them, which will save you on future recruitment.

Offering healthcare to your employees also comes with certain tax benefits. All of your healthcare-related expenses are tax deductible, so you can deduct every cent you spend on your employees’ premiums from your state and federal taxes. If you have fewer than 25 employees (making under a certain amount of money), you can also look into an ACA Small Business Health Options Program (SHOP) plan, which could qualify you for the small business healthcare tax credit. This provision of the ACA could save you up to 50% of your premium expenses. 

In the end, it all comes down to what is right for you and your employees. You don’t need to offer part-time employees healthcare, but consider the benefits for your employees – and your business – of doing so, and calculate how much you’ll spend versus how much you’ll save on taxes and fewer sick days. If you’ve made up your mind to look for a plan – or if you need help deciding! – come to EZ. We’ll set you up with your very own agent who will go over all of your options, break everything down for you, and get you fast, accurate quotes – for free! Get started with us today by simply entering your zip code in the bar above, or you can speak to an agent by calling 888-998-2027.

About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.

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