Everyone has heard about the recent healthcare reform law, but many people, individuals and business owners alike, are confused as to what the Affordable Care Act (ACA) will mean for them. With the January 1, 2014 deadline fast approaching, small businesses need to prepare for possible changes.
Before we look at the healthcare changes mandated by law, let’s look at what employees expect from their employers. Studies report that 85 percent of employees stated that they’d continue to work for their employer without subsidized health insurance. However, 60 percent of these same employees would expect a pay raise to compensate for the lack of benefits. Small business owners would be wise to listen to such feedback, particularly since it represents such a large portion of the workforce.
Now that you, a small business owner, know that employees either want employer-sponsored healthcare or more money to purchase their own healthcare, let’s review what changes you must make under the new law.
The ACA defines a small business as one with fewer than 50 full-time employees. These small businesses will not be required to provide health insurance to their employees, and therefore do not need to make any undesired changes. A recent report stated that 97 percent of small businesses (as traditionally defined by American citizens) do have fewer than 50 employees, meaning that only three percent of all small businesses must make changes under the ACA.
Small businesses that willingly choose to offer employee benefits will be eligible for tax credits, granted they meet the following conditions:
• 25 or fewer full-time employees
• Pay at least half of employee premiums
• All employees earn an average annual salary of less than $50,000
Businesses that meet these requirements can receive two consecutive years of tax credits on a sliding scale of up to 35 percent of premiums paid during 2014 and up to 50 percent of premiums paid during 2015. These tax credits are rewarded to both small businesses and non-profits to help cover the expense of providing health insurance. Small businesses with 26 to 49 employees are seen to be profitable enough to offer employee healthcare if they so choose and will not be eligible for tax credits.
Larger businesses with 50 or more employees are now required by law to offer employee benefits and will be subject to fines that can exceed $40,000 if they do not comply; whereas, small businesses are exempt from such fines.
Small businesses that do choose to offer employee health insurance must first select a price tier of coverage and decide what portion of the premium to pay (larger business must pay for at least half of each employee’s “minimal essential coverage”). If spouses and families are not covered under an employee’s health insurance plan, they will need to purchase individual policies from the Health Insurance Marketplace before January to meet the ACA requirements.
Change doesn’t have to be a scary thing if you understand what it entails. With every citizen insured, we will take one big step toward being a healthier nation.