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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:

Now everything are rising,but wages do not rise forever .we employed an average of 40 or more hours per week.
I'm working in a company whose Businesses with Fewer than 25 Employees .they provide our health insurance,but pay average annual wages below $50,00 .what do you think ?
I agree with the comments above, small businesses need much more attention to quality of service. The small business experience as much attention to it, the more successful.
I am not sure where your son's home healthcare agency is located; however, what I can tell you is that the act does have ramifications for home health providers that have a large workforce of per diem employees who work part time on an hourly or visit basis. Knowing a bit about the industry, having worked in it for about 2 decades, I can tell you that it is very likely that not all of the agency's employees are actually full time employees. Thus, even though the FTE count may be at 50 or higher, the act requires that a large employer provide coverage only to its full time employees. My guess is that your son's agency employs many people on a 'per diem' basis as most home health agencies do and that the true FTE count may be less than 50 which would exempt him from the provisions of the Affordable Care Act's requirements. We work with many home health agencies and would be happy to share further insight after receiving a bit more information about the size of the agency and its location. No obligation to you -- just thought I would try to be helpful.
Seems the safest way to disseminate the information would be to include it in the new hire packet or Employee Manual. We require that employees sign that they've received the employee manual and keep that on file.
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.
This is still a bit vague for entrepreneurs I think. Thanks for the information by the way.
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.
I only have 5 companies who do not know the application is not
pen enrollment begins on October 1, 2013. SHOP will offer small businesses increased purchasing power similar to that of very large businesses

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