Small business owners across the nation breathed a collective sigh of relief when it was announced over the Independence Day holiday that key provisions of the 2010 Healthcare reform legislation, officially known as the Affordable Care Act (ACA), won’t go into effect until January of 2014. That means that there are still a few months to prepare for the new healthcare environment and regulations. The ACA legislation contains more than 2000 pages of dense information that few people will actually read, so businesses are relying on accountants and business analysts to sum up the requirements. All business owners really want to know is, “What are the effects of healthcare reform on my business in actual hard dollars?” Here is a basic overview of the most salient features of this healthcare reform:
What does the healthcare reform legislation require?
First of all, the most important point to understand is that “small ventures” – with 50 or less full-time employees, representing 96 percent of American businesses – are exempt from the most controversial mandate of the ACA that requires large enterprises to offer health benefits or pay a fine of $2,000 per employee. This means small businesses will not have to be concerned with this until they have 49 full-time employees (working 30 hours or more) and in a position to hire.
How much will it cost?
Although small ventures are not required of offer insurance, an incentive has been set up to encourage them to do so. A “small business tax credit” will be available defray some of the costs of coverage. For companies of 25 or less, tax credits are available to reimburse up to 35 percent of premiums covering tax years 2010-2013. Next year, the tax credits will go up to 50 percent of premiums. The picture is a bit better for small businesses with less than 11 employees who earn less than $25,000. Those businesses are eligible for full reimbursement of health care premiums.
What should businesses do by 2014 to get compatible?
Starting in 2014, small businesses of up to 100 employees (including sole proprietors) can shop for coverage in state-run health exchanges. The federal government projects that more than 25 million people will be able to access these health exchanges. It will be up to each individual state to decide if they will allow companies of more than 100 employees to find coverage on these health exchanges as well.
Learn more about the ACA and what it means in terms of tax impacts at the IRS page which attempts to cover a wide range of topics. The Small Business Association also has some detailed articles on the ACA prepared based on how many employees you have. Undoubtedly, there will be a great deal more changes happening as the proposals runs into real-world snags, so keep these links handy for updates.