Hawaii Small Employer/Small Business FAQs
Due to the complexity of the law that may require very fact-specific analysis, this material is not intended to be legal, accounting, or other professional advice, and is provided only as general information.
Last reviewed: Oct. 12, 2015.
What is the Small Business Tax Credit for providing health coverage?
- A Small Business Tax Credit may be available to Small Employers with 25 or fewer full-time equivalent employees, with an average annual salary of less than $50,000 (adjusted for inflation). The employer must pay at least 50% in a uniform contribution of the total premium cost of the health coverage for the employee (not family).
- In order to get tax credits for the 2016 tax year, the qualified Small Employer must purchase an ACA Qualified Health Plan. Other plans do not qualify for a tax credit.
- For more information and forms, visit the Internal Revenue Service (IRS) at https://www.irs.gov/Affordable-Care-Act/Employers/Small-Business-Health-Care-Tax-Credit-and-the-SHOP-Marketplace
I am self-employed or a sole proprietor – Will the new law impact my health insurance choices?
- If you are self-employed without employees, you are NOT considered an employer, and must purchase an individual (non-group) policy inside or outside HealthCare.gov.
How to determine if you are “self-employed”:
- If you operate an income-generating business with zero employees, then you are considered self-employed (not an employer).
- If you have employees (generally whose income you repost on a W-2 at the end of the year), who are NOT a spouse or family member you ARE considered an employer, in which case you could get coverage for yourself and your employees through the SHOP Marketplace.
Do I have to comply with Prepaid Health Care Act? Can I tell my employees to purchase through HealthCare.gov and subsidize the difference?
- Yes, all Hawaii small employers MUST still comply with the Prepaid Health Care Act.
- No, Hawaii small employers CANNOT incentivize employees to purchase through HealthCare.gov.
What is a “Full-time Equivalent” Employee?
- In Hawaii, under Prepaid Health Care Act, it is important to note a full-time employee is anyone who works 20 or more hours a week for four consecutive weeks.
- The federal ACA law defines full-time employees differently. Under ACA, a full-time employee is anyone who works 30 or more hours a week. Note that there are complexities involved in calculating full-time employees under federal regulations.
Do I have to purchase through HealthCare.gov?
- No, but eligibility for the Small Business Tax Credit will only be applied to those who purchase an ACA Qualified Health Plan.
- Visit https://labor.hawaii.gov/aca-smallbiz/ for more information on options for Small Businesses.
What are Essential Health Benefits (EHBs) and what do they provide?
- Health plans sold in the individual and small group markets must cover ten benefit categories called Essential Health Benefits (EHB).
- EHBs are not required for qualifying “transitional” plans (also called “grandmothered” plans).
- The EHB plan must include ten (10) specific categories of services listed below:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
The EHBs must also:
- Reflect typical employer health benefit plans
- Comply with Mental Health Parity and Addiction Equity Act of 2008
- Balance comprehensiveness and affordability for those purchasing coverage
- Starting with plan years or policy years that began on or after September 23, 2010, health plans can no longer impose a lifetime dollar limit on spending for these services.
How is a small employer/small business defined?
- Hawaii defines a small employer/small business as one with 50 or fewer full-time employees.
Do I have to cover my employee’s family?
- No, the ACA does NOT require an employer to sponsor family coverage.
What are the penalties if I do NOT cover my employees?
- All requirements and penalties for the Prepaid Health Care Act apply. Large employers are also subject to a penalty under ACA.
Can I offer insurance to my non-Prepaid Health Care Act Employees?
- Yes, insurance offered to non-Prepaid Health Care Act eligible employees do NOT have to comply with the Prepaid Health Care Act standards.
- Generally, employers are never precluded or never prohibited from offering additional health benefits to lawfully authorized workers similarly situated who are not legally entitled to coverage under the Prepaid Health Care Act. Example: migrant workers, real estate agents, certain other kinds of workers.