Do My Health Insurance Premiums Qualify?

Health Insurance Subsidy for Small BusinessObama’s health care plan offers many choices for the small business owner in California. You might be asking yourself just how to qualify your health insurance premiums with all the new information available.

When considering this question, keep in mind that premiums you paid under a qualifying arrangement for individual employees will be counted when figuring this credit. If your state offers a tax credit or subsidy, do not reduce the amount you paid for consideration. Similarly, if your state pays a premium directly to the insurance provider, include that amount in the consideration for the amount of premium for this tax credit. Remember to consider the actual amount you pay in and understand what qualifies for this tax credit. It is only the specific amount paid by the employer, and does not include any portion paid by the employees.

According to the IRS Instruction Form 8941, to qualify as health insurance coverage, it should meet the following criteria:

  • Health insurance coverage means benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a health insurance provider.
  • A health insurance provider is either an insurance company or another entity licensed under state law to provide health insurance coverage.

Health insurance coverage also includes coverage under the following plans:

  • Limited scope dental or vision plans.
  • Long-term care plans or nursing home care plans.
  • Home health care plans.
  • Community-based care plans.
  • Coverage only for a specified disease or illness.
  • Hospital indemnity or other fixed indemnity insurance.
  • Medicare supplemental health insurance.
  • Certain other supplemental coverage.
  • Similar supplemental coverage provided to coverage under a group health plan.
  • Any combination of the above.

Health insurance coverage does not include the following benefits:

  • Coverage only for accident, or disability income insurance, or any combination thereof.
  • Coverage issued as a supplement to liability insurance.
  • Liability insurance, including general liability insurance and automobile liability insurance.
  • Workers’ compensation or similar insurance.
  • Automobile medical payment insurance.
  • Credit-only insurance.
  • Coverage for on-site medical clinics.
  • Similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental to other insurance benefits.

Because the coverage must be offered by a health insurance provider as described in the above list, health insurance coverage does not include benefits provided by:

    • Health Reimbursement Arrangements (HRAs)
    • Flexible Spending Arrangements (FSAs)
    • Coverage Under Self-Insured Plans
    • Health Savings Accounts (HSAs)

    The Health Care Reform Act brings a lot of new concerns to the table for small businesses. Be sure to read through these carefully. Any and all qualifying situations should be included in the premiums paid for this tax credit consideration.

    Let’s take a closer look at qualifying arrangements in the next article and how this helps you determine your eligibility.

    Qualifying Arrangements Explained: Health Insurance 201
    Qualifying Arrangements Explained


    2012 Instructions 8941 Small Business Tax Credit
    2012 Instructions 8941