Last week the Supreme Court handed down its much anticipated decision on the constitutionality of the Affordable Care Act of 2010 (dba Obamacare). If you are a small business owner or manager, it really doesn’t matter whether you are in the 50% of Americans who were thrilled about this decision or the 50% who were stunned in disbelief. It is what it is, and now we need to live with the outcome and determine how the law, once fully implemented, will impact our businesses and our employees.
The act defines a ‘small business’ as one employing fewer than 200 workers and the vast majority of these have fewer than 50 employees overall. The very first thing that you need to know is that for these companies, the smallest of small businesses, the ACA will have a minimal impact – indeed for companies with less than 50 FTEs, there will be no insurance requirement at all. For businesses with more than 50 employees, the new rules do kick in and will bring some changes to the way you provide health coverage for your workers.
1. Employers now have new responsibilities. If your company has more than 50 full-time employees (or the equivalent), you will be subject to the new law and you will have certain new obligations. Starting in 2014, you will be required to provide health coverage that is deemed ‘affordable.’ To be considered affordable, the plan you offer just cover at least 60% of the worker’s covered health care costs and your employees can not be made to pay over 9.5% of their full family income for the coverage you provide. For instance, if the employee’s total gross household income is $100,000 (including the salary you pay them), their share of cost of the plan can not exceed $9,500.
2. What you absolutely must provide. The new law requires that, at a minimum, you provide an “essential health benefits” plan. Each state will determine the details of those benefits, but they must include coverage in at least 10 areas of he alt care. including preventive care, emergency care, maternity coverage, hospital and physician services, and prescription drugs.
3. Coverage should become cheaper. According to the Congressional Budget Office, average health insurance premiums will fall by as much as 4% when the law is fully implemented. In addition, tax credits that will kick in for many small businesses will mean savings of as much as 11% on total health insurance costs. The combination of increased competition for insurance companies, a larger pool of insured people, and reduced red tape should help allow most small businesses to realize meaningful savings on health care coverage.
4. Tax credits for small businesses. If your company has fewer than 25 employees and you currently provide health insurance you already qualify for a tax credit of up to 35% of your costs for that benefit. Starting in 2014, that credit will increase to 50% of your costs if you offer new insurance through your state’s health insurance exchange. In 2011, over 360,000 small businesses received this tax credit!
5. Choosing to opt out. If you decline to provide coverage for your workers or if the coverage you to provide does not meet the minimum required, you will have to pay a fine which is based on a complex formula and starts at $2,000 per worker when there is no coverage provided. The complexity doesn’t help any of us and many businesses will start to do the math to determine whether they may be better off paying the penalty as long as their workers are able to obtain coverage on their own. Some companies may find initial savings with this approach, but the law does provide that those penalties rise as premiums go up. In addition, small business owners need to consider employee morale, your ability to attract new and talented workers, and your own obligations to your team. In addition, study after study has shown that great health benefits lead to healthier workers, fewer sick days, and higher worker productivity.
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