With the passage of Obamacare (the Affordable Care Act, or ACA), all Americans are now required to carry minimum essential health coverage (unless exempt). Additionally, healthcare reform has changed requirements for employers providing health benefits packages to their employees. Although the Employer Mandate/Employer Penalty portion of Obamacare was delayed (it was originally set to take effect in 2014), businesses of a certain size will be required to provide full-time employees (and dependents up to age 26) with health insurance by 2016 or pay a fee for failure to comply. For many small businesses, healthcare reform and the changing laws may seem worrisome. However, once you understand the requirements and how they affect you, as well as potential incentives designed to reduce the burden on small business, you may find that there was nothing to worry about.
Here’s how it works. If your business boasts more than 100 full-time (FT) employees, you will be required to provide affordable options for minimum essential coverage for 70% of FT workers by 2015 and 95% by 2016. Small businesses that employ 50-99 FT employees will have to provide qualifying health benefits by 2016. As for businesses that claim fewer than 50 FT employees, they are exempt from the mandate. However, there are benefits to be gained for small businesses with 49 or fewer FT employees that opt to provide qualifying health insurance benefits to their employees. Not only will you increase your recruitment opportunities and entice more qualified candidates for hire, but you might also gain access to tax incentives designed to encourage small businesses to provide health insurance for employees, despite being exempt from the mandate/penalty under Obamacare.
Tax breaks and tax credits are both offered, so it’s just a matter of finding out what your small business may qualify for if you elect to provide health insurance options for employees. The place to start is with the Small Business Health Options Program (SHOP), which provides tax incentives for small businesses that qualify. Tax incentives are available to companies that have fewer than 25 FT employees earning less than $50,000 annually on average. In addition, companies with fewer than 10 FT employees earning less than $20,000 annually on average are eligible for a tax credit that amounts to 50% of what they’re expected to pay toward premiums for employees (although eligibility requires that employers pay at least 50% of the total premium cost). As for small businesses with 50 or more FT employees that fail to meet the mandate, penalties will apply.
The problem thus far for small businesses has been that they simply can’t get the same deals on group rates that larger companies are able to bargain for thanks to a greater number of policies needed. Obamacare’s SHOP should help to correct this issue. As more companies sign up for the service, bargaining power for all in the group will increase. So small businesses that elect to get coverage options for employees through SHOP could not only see lower prices overall, but if they qualify they could also receive benefits including tax incentives as well.