The Affordable Care Act was passed by Congress and then signed into law by the President on March 23, 2010. It was upheld by the Supreme Court, and has started going into effect. I'll be the first to admit I did not read the more than 2,000 pages of the law. I'm willing to bet you didn't either. But now that some of it has been implemented and other parts are scheduled to go into effect, it's time to explore what it means for your
small business.
Fewer than 50 employees?
Businesses with fewer than 50 employees are not required to provide health insurance for their workers. If you have fewer than 50 employees, don't provide insurance already and don't intend to, then the mandate that every American have health insurance by 2014 must be met by your individual employees, not your company. Your uninsured employees will have to purchase health insurance or pay a penalty. Depending on their income level, they may be eligible for Medicaid or qualify for subsidies from the government to help them purchase coverage.
Fewer than 25 employees?
Of course 25 is fewer than 50, so again, you don't have to provide health insurance. But if you have fewer than 25 employees and the average annual wages you pay are less than $50,000, you might consider providing health insurance. If you do, you can qualify for a small business tax credit of up to 35 percent to offset the portion of the health insurance premiums you pay. And starting in 2014, that small business tax credit goes up to 50 percent. A tax credit is an amount subtracted from the amount of income tax owed.
More than 50 employees?
Companies with more than 50 full-time employees or the equivalent must provide health insurance for workers or risk penalties. Most of them – 94 percent according to the Kaiser Family Foundation – already do. The remaining 6 percent of companies with more than 50 employees that do not provide insurance, will have to start or they will be assessed an annual penalty of $2,000 for every employee in the company. The first 30 employees, however, are not counted when calculating the penalty. That means an employer with 70 employees would pay a penalty for 40 workers, or $80,000.
Where do I shop for health insurance?
Beginning in 2014, health insurance will be available to individuals and small businesses through state-run exchanges. This will require insurance companies to compete for business in the marketplace. If your state has decided not to establish its own health insurance exchange marketplaces, you can utilize a federal exchange.
The exchange program for small businesses, called Small Business Health Options Program (SHOP), will allow small businesses to pool together to increase purchasing power. This is intended to bring rates for small businesses in line with those available to large corporations.
The health insurance plans available in the SHOP will be run by private health insurance companies like small group plans are run now. Cost and coverage information will be presented in a standard format so price, coverage, quality and other features of the plans can be compared.
SHOP will be available to small businesses with up to 100 employees, but states have the option to limit participation to businesses with 50 employees or less until 2016. If a business participating in SHOP grows to have more than 100 employees, it may stay in the program. And starting in 2017, states can choose to allow businesses with more than 100 employees to utilize SHOP.
Starting in October, you'll be able to get information about all the plans available in your area. You and your employees will be able to enroll through an insurance broker, directly through the website, or by calling a toll-free phone number.
What if it's just you?
According to the Kaiser Family Foundation, about one in four small business owners are uninsured. Under the new law, self-employed and uncovered individuals will be required to carry health insurance or pay a fine, which the Supreme Court deemed to be a tax.
The size of that tax depends on how many people are in the uninsured's household, and how much they earn. In 2014, the annual penalty will be $95 per adult and $47.50 per child, up to a family maximum of $285, or 1 percent of family income, whichever is greater. In 2015, the penalty increases to $325 per adult and $162.50 per child, up to a family maximum of $975, or 2 percent of family income, whichever is greater. And in 2016, the penalty goes up to $695 per adult and $347.50 per child, up to a family maximum of $2,085, or 2.5 percent of family income, whichever is greater.
Also, small business owners who purchased their own health policy in the past relied on the individual insurance market. That means changes in the individual insurance market brought on by the Affordable Care Act could impact small business owners more than changes in the rules for the small business insurance market. Some of these changes include: guaranteed access to coverage and no premium surcharges for people with pre-existing health conditions, limits on how much premiums can vary by age, a requirement that all insurers cover certain benefits, the creation of health insurance exchanges, and tax credits to make premiums more affordable.
What's the bottom line?
You probably read this whole article thinking, "Yeah, but what is this going to cost me?" And now I'm going to disappoint you. There are so many variables for every individual, family and business, there's no one-size-fits-all answer to that question. And the exchanges haven't even started up yet, so insurance premiums are unknown. But, knowing your particular circumstances, you can play around with some of the calculators that are popping up online to get some idea. Search "Affordable Care Act calculator," but keep in mind, nothing is set in stone until real plans are available for comparison shopping in October.
Where can you learn more?
I still don't think you have to read all 2,000 pages. There are plenty of people who have done that and can sum up the information for you. You'll find readable summaries at:
• http://healthcare.gov/index.html
• http://whitehouse.gov/healthreform/small-business/tax-credit
• http://irs.gov/uac/Affordable-Care-Act-Tax-Provisions
• http://sba.gov/content/health-care-health-care-reform
If you are a visual learner, a guy named Jonathan Gruber actually created a comic book about health care reform, and there are lots of YouTube videos reviewing various aspects of the law as well.
