The Affordable Care Act Considerations for Small Business Owners

As a small business owner I have observed the machinations of the Affordable Care Act from a safe distance.  From its inception, it has served as a divisive focal point for our elected representatives.  As with most comprehensive government policy initiatives, the respective sides have spun the details in a way that works to their advantage.  The Affordable Care Act has not been exempt from this posturing and continues to have its share of supporters and detractors. Over the years I have found that most new initiatives never fully meet the needs of everyone but if looked at more closely, often have appealing features for certain groups or individuals.  While not completely sold on every aspect of the Affordable Care Act, I have decided to assess the various components.  I plan to use this forum to highlight a few basics and expand further in future writings.  In time, my goal will be to make an informed decision on whether the Affordable Care Act is right for my business, my three associates, and for me and my family.

The Basics

  • Beginning in 2014, small business owners will have access to a Marketplace that will allow side-by-side comparisons of the different health plans available in their state (my focus will be North Carolina) to find a plan that fits their budget and that is right for their businesses and employees.
  • Each Marketplace will operate a Small Business Health Options Program, or SHOP.  In 2014, employers will be able to choose a plan, from a variety (ideally) of Marketplace options, to offer their employees.
  • Open enrollment for SHOP begins October 1st, 2013 for coverage beginning as soon as January 1, 2014
  • The Small Business Health Options Program (SHOP) is designed for small employers with 50 or fewer full-time equivalent employees.
  • Small business owners can choose a plan and how much they want to pay towards their employees’ premiums.  Employees can then go online and enroll.  Employees can elect to accept or decline coverage.  The choice is theirs to make.
  • Employees can buy coverage in the individual Marketplace or elsewhere. But as long as the coverage the small business owner offers is affordable[1] and meets minimum value[2], he or she won’t have to make an Employer Shared Responsibility[3] payment.

[1] Affordable – Employer coverage is considered affordable if the employee’s share of the annual premium for self-only coverage is no greater than 9.5% of annual household income.

[2] Minimum value – A health plan meets this standard if it’s designed to pay at least 60% of the total cost of medical services for a standard population

[3] Employer Shared Responsibility – The Affordable Care Act requires certain employers with at least 50 full-time employees (or equivalents) to offer health insurance coverage to its full-time employees (and their dependents) that meets certain minimum standards set by the Affordable Care Act or to make a tax payment called the ESRP.

Small Business Health Care Tax Credit

  • Small businesses may qualify for employer health care tax credits if you have fewer than 25 full-time equivalent employees making an average of about $50,000 a year or less.
  • To qualify for the Small Business Health Care Tax Credit, you must pay at least 50% of your full-time employees’ premium costs. You don’t need to offer coverage to your part-time employees or to dependents.
  • Starting in 2014, the tax credit is worth up to 50% of your contribution toward employees’ premium costs (up to 35% for tax-exempt employers).

Having to make an Employer Shared Responsibility payment or not is one of the more controversial points of the Affordable Care Act.  It also represents a detail that is important to know whether it applies to your particular situation.  As a business owner with a total of four associates, this particular aspect does not apply to my situation.  Being exempt from this provision means I’m more open to what the Affordable Care Act is trying to accomplish.  If the Affordable Care Act can create a marketplace where insurance carriers have to compete and offer coverage at a lower cost; that seems to work to my advantage.  For this reason I plan to explore the details of the North Carolina marketplace because I think providing health insurance for my associates is the right thing to do.  If the Affordable Care Act makes that possible by lowering the costs for comprehensive coverage then I will give strong consideration to providing health coverage for my associates as my company grows.

 

 

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Facts for this summary have been sourced from the Department of Health and Human Resources.  Additional information can be found there or at healthcare.gov.  This summary should not be the sole source of information when making a decision on whether or not to provide health insurance coverage to your associates/employees. As with any financial situation, please consult a professional before making any final decisions.