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Top Three Things Small Businesses Should Know About the Affordable Care Act

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Top Three Things Small Businesses Should Know About the Affordable Care Act

By Meredith K. Olafson, SBA Official
Published: January 25, 2013 Updated: January 25, 2013

 

The Affordable Care Act will help small businesses by lowering premium cost growth and increasing access to quality, affordable health insurance.   Depending on whether you’re a small employer or a larger employer, different provisions of the Affordable Care Act may apply to you as described below.                                           

1.  Businesses with Fewer than 25 Employees- Small Business Tax Credits

The Affordable Care Act does not require that businesses provide health insurance, but it offers tax credits for eligible small businesses that choose to provide insurance to their employees.  To qualify for a small business tax credit of up to 35% (up to 25% for non-profits), you must have:

  • Fewer than 25 full-time equivalent employees
  • Pay average annual wages below $50,000
  • Contribute 50% or more toward employee health insurance premiums

Beginning in 2014, this tax credit goes up to 50% (35% for non-profits) and is available to qualified small businesses who participate in the Small Business Health Options Program (SHOP) Exchanges.

2.   Businesses with 50 or Fewer Employees- Affordable Insurance Marketplaces

The Affordable Care Act does not require that businesses provide health insurance, but beginning in 2014, small businesses with generally 50 or fewer employees will be able to purchase coverage through SHOP , competitive marketplaces where small employers can go to find health coverage from a selection of providers.  The SHOP Marketplaces and Individual Marketplaces for those who are self-employed open on January 1, 2014. Open enrollment begins on October 1, 2013.  SHOP will offer small businesses increased purchasing power similar to that of large businesses.

3.  Businesses with 50 or More Employees- Employer Shared Responsibility Provisions

Under the Affordable Care Act, the Federal government, State governments, insurers, employers, and individuals share the responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States. Employers are not required to provide coverage to their employees under the Affordable Care Act.   However, beginning in 2014, businesses with 50 or more full-time employees (or full-time equivalents) that do not offer affordable health insurance that provides a minimum level of coverage to substantially all of their full-time employees (and their dependents) may be subject to an employer shared responsibility payment if at least one of their full-time employees receives a premium tax credit to purchase coverage in an insurance Marketplace.  A full-time employee is generally one who is employed an average of 30 or more hours per week. 

If you meet or are close to this threshold level of full-time employees, it’s important to understand how these rules may apply to you and how the employer shared responsibility payments could be triggered.   For more guidance on the employer shared responsibility payments, refer to this FAQ from the IRS.

About the Author:

Meredith K. Olafson

SBA Official

Meredith K. Olafson is Senior Policy Advisor for the U.S. Small Business Administration where she oversees the agency's education and outreach efforts around health care and the Affordable Care Act.

Comments:

I have worked in the healthcare for over a decade and I know the cost of our employees premiums have sky-rocked over the last couple of year! Excellent article and very informative
i am not sure about bussiness but this site make me aware about everything involved bussiness. thanks
i am not sure about bussiness but this site make me aware about everything involved bussiness. thanks
my company is a small business, so struggling to identify a solution.
Thank you for sharing these useful information about Affordable Care Act when starting a small business.
I fall under "1. Businesses with Fewer than 25 Employees". Thanks for the information. Very helpful!
I think small bussiness want to become successful they need much more quality of services
Small businesses need much more attention to quality of service. to become more successful.
What youre saying is completely true. I know that everybody must say the same thing, but I just think that you put it in a way that everyone can understand. I also love the images you put in here. They fit so well with what youre trying to say. Im sure youll reach so many people with what youve got to say. http://infosmartphoneku.blogspot.com/p/perbandingan-smartphone.html http://rachmadshare.blogspot.com/p/laptop.html
Thanks for the info. The whole Obama Care is pretty confusing and when I search for information, I usually only get opinionated heated debates. It looks like it's here to stay! Thanks again - James

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