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Healthcare Options for 2019

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Healthcare Options for 2019

Open enrollment begins Nov. 1, 2018 and ends on Dec. 15, 2018 and coverage begins Jan. 1, 2019.  This is also the period for renewal and changing your plan.  If you are an employer and thinking about moving to an employer-sponsored plan, this is also the time to evaluate your options.

The annual limit on total enrollee cost sharing for essential health benefits (“EHB”) for plan years beginning on or after Jan. 1, 2019, is $7,900 for self-only coverage and $15,800 for family coverage.  For high deductible health plans (“HDHP”) compatible with Health Savings Accounts (“HSAs”) the out-of-pocket maximums are even lower.  For 2019 plan years, the out-of-pocket maximum limit for HDHPs is $6,750 for self-only coverage and $13,500 for family coverage.

Employer-sponsored health insurance checklist

Here are some things you want to be thinking about if you are starting or already have an employer-sponsored plan:

  • Make sure you provide your insureds with required disclosures, including a Summary of Benefits and Coverage (SBC); and
  • Make sure you provide proper notice of cost-sharing and the out-of-pocket cost, and that it is below the maximum, for Essential Health Benefits (EHB).

Tax Benefits for Small Business

Generally speaking, any expenses an employer incurs related to health insurance (for employees or for dependents) are 100% tax-deductible as ordinary business expenses, on both state and federal income taxes.

If you deduct the cost from the employee’s paycheck (and probably pay them less or delay salary increases to boot), the employee will get the added benefit of paying for the cost of health insurance pre-tax.  This increases the employee’s take home pay on their salary and lowers the amount of the employee’s taxable income.

Tax Credit for Small Employer Health Insurance Premiums

What is the Small Employer Health Premium Tax Credit?  The small employer health insurance tax credit under Sec. 45R was enacted by the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, to help small businesses and small Sec. 501(c) tax-exempt organizations afford the cost of providing health insurance coverage for their employees.

Who does this tax credit help?  Not too many employers.  The tax credit can be claimed by employers who meet the following criteria:

  • Have fewer than 25 full-time equivalent employees;
  • Pay average wages of less than $50,000 a year per full-time equivalent (indexed annually for inflation beginning in 2014);
    • For tax year 2018, the inflation-adjusted amount is $53,000
  • Offer a qualified health plan to its employees through a Small Business Health Options Program Marketplace (or qualify for a limited exception to this requirement); and
  • Pay at least 50 percent of the cost of employee-only – not family or dependent – health care coverage for each employee.

Each of the criteria can be problematic.  A full-time equivalent employee (“FTE”) is someone who works 2,080 hours per year, so employees who work less can have “average wages” skewed up, and the average wage limit is very low, so the credit disproportionately applies to low-skilled labor employers.

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.



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Category: Tax

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