Whether you think the Affordable Care Act is the dawn of a new Enlightenment or a sign of the Apocalypse, it will affect your business – maybe sooner than you think.
Many small business owners may discover, to their surprise, that the health care reform law widely credited to Barack Obama contains more positives than perils – at least in the short term.
According to government statistics, the average small business owner paid 18% more for the same health insurance policy than a big business. As of September 23, however, the new law offers tax credits (worth up to 35% of the premiums paid) if your firm has fewer than 25 employees with annual wages less than $50,000. (But you must cover at least 50% of total premium costs for employees.)
Businesses with 10 or fewer employees, earning annual wages under $25,000, will have full access to the tax credit, but the credit is phased out as annual wages increase.
Tax-exempt organizations can receive a tax rebate up to 25% of what they contribute to employees’ health insurance premiums.
Beginning in 2014 – when the lion’s share of provisions kick in – states will have to establish Small Business Health Options Programs (SHOP exchanges) that allow small businesses (those with fewer than 100 employees) to pool their money to buy insurance. The Congressional Budget Office (CBO) predicts that SHOP participants will enjoy savings of 1% to 4% on premiums, while increasing their coverage up to 3%.
In 2014 and 2015, the small business tax credit will increase to 50% for companies buying insurance through SHOPs. During that period, the CBO believes the tax credit will impact 12% of employees covered by SHOPs, and reduce the cost of insurance by as much as 11%.
There are a few cons to health care reform: Starting in 2014, businesses with more than 50 employees must offer health care coverage or pay a penalty of $750 a year for each full-time worker. Firms with 50+ employees will be penalized $2,000 per worker if they fail to provide coverage.
This last provision is especially obnoxious to the owners of fast growing enterprises, who’ve warned that the 50-employee threshold will discourage growth and cause some companies to resort to evasions. There’s also concern that some firms will opt to save money by eliminating health benefits altogether.
What impact is health reform likely to have on your business?