Is my business required to offer benefits to employees' spouses and/or dependents?
There are 2 laws guiding the area of insurance coverage to be provided by an employer to the employees and their family members:
- ACA (Patient Protection and Affordable Care Act) or in other words, Obamacare. We’ve gone into a lengthier discussion about this on our employee minimums article.
- COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)
Below are the details of how each law handles the situation of offering benefits by the employers who have 20 or more employees working as full time equivalent in the company.
- The Affordable Care Act has outlined some Employer Shared Responsibility provisions, under which all employers with more than 50 full time equivalent employees (FTEs) must offer minimum “affordable” essential coverage such that it provides “minimum value” to their full-time employees and their dependents. This employer group is called applicable large employers or ALEs. And if they choose not to offer this benefit to their FTEs, then the employers have to pay a significant sum as penalty to the Internal Revenue Service each month.
- ACA defines the dependents of the employees as their children under the age 26 years. Coverage must be offered by the employers to all of the employees’ dependents up to age 26. Once a dependent crosses age 26 years, the health care coverage no longer has to be offered.
- Under ACA, Spouses of the employees do not count as dependents; hence the coverage is not mandatory to be offered to spouses by the employers.
- So, the basic rule for the employers offering health care benefits to the employees under ACA, there is a legal obligation to extend the offer only up to the dependents of the employees and not to their spouses. However the employers are surely at liberty to decide and extend the offer to the employees’ spouses as well there is no legal restrictions on that.
- Also, the employers with less than 50 employees are eligible to offer health care benefits to their employees and their spouses and dependents, should they wish to. ACA mandates do not apply to these employers at all.
- COBRA on the other hand is a law that is designed to provide a fall back cushion of health care for the employee and their dependents, including spouses, in the case they become ineligible for receiving the employer’s offered health insurance benefits. People would pay in a defined contribution mode along with their employers to fund the COBRA provisions. Then in the future, when they are no more eligible for the employer’s provided benefits, they may opt to use the COBRA plan to provide extended benefits of same degree as hen employed, to their spouses, dependents and themselves.