With the impending full implementation of the Affordable Care Act coming on January 1, 2014 what is your small business doing to prepare?
The New York Times and other major media outlets are already reporting that a key provision of the Care Act designed to help small businesses and their employees has been pushed back to 2015.
The Small Business Health Options Program or SHOP, was designed in the law to be a separate health care exchange for small businesses to allow them to offer employees multiple choices when it came to picking a plan.
However with the federal government apparently behind the eight ball setting up health insurance exchanges in 33 states, they have postponed the SHOP program in those states until 2015, and pushed back the requirement for the other states as well, reports the Times.
Now come Jan. 1, small employers offering health plans will only be able to offer their employees one choice. Reaction from supporters of the Care Act has been negative. The Small Business Majority, an advocacy group, told the Times the that delay is a blow to small businesses.
With health insurance still a serious concern for small businesses, especially when it comes to affordability, and availability, here are four pieces of information about the Affordable Care Act that your business needs to know about.
1. If you have fewer than 50 full-time employees you will not face any financial penalties for not providing your employees with health insurance.
Although it is certainly a good thing to provide your employees with health coverage, it’s not always going to be the most economically feasible thing for a small business, especially in this economy.
However if you have more than 50 full-time employees and do not offer them coverage you could wind up with a substantially lighter bank account.
According to The Henry J. Kaiser Family Foundation, if no coverage is offered and at least one employee receives a premium tax credit or cost sharing subsidy at a health insurance exchange then the employer could face an annual penalty of $2,000 times the number of full-time employees minus 30. That amount is scheduled to increase each year with the growth in insurance premiums.
Maybe you’re a larger employer and offer some insurance, but you can also be penalized for not providing it at a low enough cost to employees.
Again according to the Kaiser Family Foundation, you will face a penalty if the provided health insurance plan does not cover at least 60% of the typical health care costs, and if employees have to pay more than 9.5 percent of their family income for coverage through their employer.
Those workers can opt to receive a tax credit and purchase their coverage through an exchange. That is when you as the small business owner will face an annual penalty of $3,000 per full-time employee receiving a tax credit up to $2,000 times the number of full-time employees minus 30. This number is also pegged to the growth in insurance premiums each year.
2. Full-time employees are calculated in the Affordable Care Act by number of hours worked.
The Affordable Care Act does an interesting thing when calculating the number of full-time employees a business has. It makes that determination based on the number of hours your employees work with a full-time employee being someone who works at least 30 hours a week, according to a FAQ from the Small Business Majority.
For example if you employ two-part time workers for 15 hours each per week, together they would add up to one full-time employee.
Each employee is calculated with a maximum of 2,080 hours a year, the equivalent of 40 hours a week.
Their FAQ gives this example of a business determining their number of full-time employees(here FTE refers to full-time employees):
Example: For the 2010 tax year, an employer pays 5 employees wages for 2,080 hours each, 3 employees wages for 1,040 hours each, and 1 employee wages for 2,300 hours.
The employer’s FTE would be calculated as follows:
1) Total hours (not exceeding 2,080 per employee) is the sum of:
a. 10,400 hours for the 5 employees paid for 2,080 hours each (5 x 2,080)
b. 3,120 hours for the 3 employees paid for 1,040 hours each (3 x 1,040)
c. 2,080 hours for the 1 employee paid for 2,300 hours (hours limited to 2,080)
Total: 15,600 hours
2) FTEs: 7 (15,600 divided by 2,080) = 7.5, rounded down to the next-lowest whole number).
This sort of thing is useful to be aware of when it comes to determining your responsibility for providing health insurance, and any tax credits your business might be eligible for.
Which brings us to point number three.
3. If you have fewer than 25 employees and offer health insurance then your business qualifies for a tax credit
Employers who employ less than 25 people and offer health insurance to them could be eligible for a tax credit of up to 35 percent of the eligible insurance premium expenses for tax years 2010–2013, according to the Small Business Majority FAQ.
Those with 10 or less full-time employees, paying annual average wages of $25,000 or less will qualify for the maximum credit.
That credit will increase to 50 percent in 2014 and the coverage must be purchased through a state health insurance exchange. And that credit will be good for two years.
4. Like your current insurance plan? Then grandfather it in!
If you already offered health insurance to your employees before the passage of the Affordable Care Act you do not have to change your insurance plan for employees. Your plan is what is called “Grandfathered in”.
You can keep your existing plan just so long as you do not make any significant changes to it that reduce coverage or increase costs significantly to employees. If you so choose you can expand the offerings of your health plan and still keep your grandfathered status.
Featured Image: Credit, Chuck Kennedy [Public domain], via Wikimedia Commons
This article was contributed by Michael Cahill, Editor of the Vista Health Solutions blog. Michael has a degree in Journalism from SUNY New Paltz. Previously he worked as a reporter for the Poughkeepsie Journal and as an editor for the Rockland County Times.