The Affordable Care Act, often referred to as the ACA, is a health care law created by President Barack Obama in 2010. The goal of the legislation was to provide affordable healthcare for all Americans and improve access to quality doctors. In order to achieve this goal, many provisions were put into place that benefit small businesses. How can small business owners best take advantage of these protections? Topics covered include: how Obamacare works, what types of changes have been made since 2014 and how it affects my own company’s situation.,
The Affordable Care Act affects small businesses in a number of ways. It is important to know how the ACA will affect your business and the changes that may need to be made. Read more in detail here: how does obamacare hurt small business.
What is your small company doing to prepare for the full implementation of the Affordable Care Act on January 1, 2014?
The New York Times and other major news organizations are already reporting that a crucial component of the Affordable Care Act aimed at assisting small companies and their workers has been postponed until 2015.
The Small Business Health Options Program, or SHOP, was created by legislation to be a distinct health-care exchange for small companies, allowing them to provide various plan options to their workers.
However, since the federal government seems to be behind schedule in establishing health insurance exchanges in 33 states, the SHOP program has been postponed in those states until 2015, as well as the requirement in the other states, according to the New York Times.
Small businesses that provide health insurance will only be allowed to give their workers one option as of January 1. Supporters of the Affordable Care Act have reacted negatively. According to the New York Times, the Small Business Majority, an advocacy organization, the delay is a blow to small companies.
With health insurance still being a major issue for small companies, particularly in terms of cost and availability, here are four facts regarding the Affordable Care Act that your company should be aware of.
1. If your company has less than 50 full-time workers, there are no financial penalties for not offering health insurance.
Although providing health insurance to your workers is a good idea, it may not always be the most cost-effective option for a small company, particularly in current economy.
However, if you have more than 50 full-time workers and do not provide them with health insurance, you may find yourself with a much smaller bank account.
According to The Henry J. Kaiser Family Foundation, if no coverage is provided and at least one employee receives a premium tax credit or cost-sharing subsidy through a health insurance exchange, the employer may be subject to a $2,000 annual penalty multiplied by the number of full-time employees minus 30. With the rise in insurance rates, that amount is expected to rise each year.
You may be a bigger company that provides insurance, but you might be punished if you don’t provide it at a low enough cost to your workers.
According to the Kaiser Family Foundation, if the offered health insurance plan does not cover at least 60% of average health care expenses, and if workers must pay more than 9.5 percent of their family income for coverage via their employer, you will face a penalty.
These employees have the option of receiving a tax credit and purchasing insurance via an exchange. That is when you, as a small company owner, will be subject to a $3,000 yearly penalty per full-time employee while also getting a tax credit of up to $2,000 times the number of full-time workers minus 30. This figure is closely linked to the annual increase in insurance premiums.
2. In the Affordable Care Act, full-time workers are defined as those who work a minimum of 30 hours per week.
When determining the number of full-time workers a company has, the Affordable Care Act does something unique. According to a Small Business Majority FAQ, it makes that decision based on the amount of hours your workers work, with a full-time employee working at least 30 hours per week.
For example, if you hire two part-time employees for 15 hours a week each, they will total one full-time employee.
A limit of 2,080 hours per year, or 40 hours per week, is computed for each employee.
The following is an example of a company calculating the number of full-time workers (hence referred to as FTEs):
An employer, for example, pays 5 workers wages for 2,080 hours each, 3 employees wages for 1,040 hours each, and 1 employee wages for 2,300 hours during the 2010 tax year.
The FTE for the employer would be determined as follows:
1) Total hours (not to exceed 2,080 per employee) are the total of: a. 10,400 hours for the 5 workers paid for 2,080 hours each; b. 10,400 hours for the 5 employees paid for 2,080 hours each; c. 10,400 hours for the 5 employees paid for 2,080 hours each; d. (5 x 2,080) b. 3,120 hours for the three workers, each of whom is paid for 1,040 hours (3 x 1,040) c. 2,080 hours for a single employee who was compensated for 2,300 hours (hours limited to 2,080)
15,600 hours in total 2) Full-time equivalents (FTEs): 7 (15,600 divided by 2,080) = 7.5 (rounded down to the next whole number).
Small Business Majority, http://www.smallbusinessmajority.org/hc-reform-faq/#1a
This is important to know when assessing your obligation for providing health insurance as well as any tax credits your company may be qualified for.
That leads us to the third point.
3. If your company has less than 25 workers and provides health insurance, you may be eligible for a tax credit.
According to the Small Business Majority FAQ, employers that employ less than 25 people and provide health insurance to them may be eligible for a tax credit of up to 35 percent of qualifying insurance premium costs for tax years 2010–2013.
The maximum credit is available to businesses with ten or fewer full-time workers and annual average salaries of $25,000 or less.
In 2014, the credit will be increased to 50%, and coverage must be bought via a state-run health insurance market. And the credit will be valid for a period of two years.
4. Are you happy with your existing insurance plan? Then it’ll be grandfathered in!
If you provided health insurance to your workers prior to the enactment of the Affordable Care Act, you do not need to make any changes to your employee insurance plan. Your plan is referred to be “grandfathered in.”
You may retain your current plan as long as you don’t make any substantial modifications that decrease coverage or considerably raise employee expenses. You may opt to broaden the scope of your health plan while maintaining your grandfathered status.
Chuck Kennedy [Public domain], through Wikimedia Commons, is credited with the featured image.
Michael Cahill, Editor of the Vista Health Solutions blog, provided this article. Michael graduated from SUNY New Paltz with a journalism degree. He previously worked for the Poughkeepsie Journal as a reporter and the Rockland County Times as an editor.
The “Affordable Care Act Employer Mandate 2021” is a law that has been passed to help small businesses with the cost of providing health insurance. The law will be in effect until December 31st, 2021. Reference: affordable care act employer mandate 2021.
Frequently Asked Questions
Is the Affordable Care Act good for business?
A: Yes, the Affordable Care Act is good for business.
Does the ACA apply to small businesses?
A: The ACA (Affordable Care Act) does not apply to small businesses.
What is a possible downside of the Affordable Care Act?
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