Healthcare in the United States is about to change. Most provisions of the historic healthcare legislation, the Affordable Care Act, will become law in January 2014. Is your small business ready? Like many other small business owners, you may be wondering what it means for you and how it will affect healthcare costs.
What small business owners need to understand about the new healthcare laws.
The Patient Protection and Affordable Care Act, attempts to address healthcare challenges in the U.S.; primarily the problem of increasing insurance premium prices coupled with decreasing numbers of employers that provide coverage.
When the Affordable Care Act goes into full effect, small business owners can expect these key changes:
Contribution requirement changes. If you employ fewer than 50 full-time people, you aren’t required to offer health insurance. But, if you have 50 or more full-time employees, the law mandates that you offer health insurance and pay 50 percent of the cost for every employee’s minimal essential coverage. This Employer Shared Responsibility payment takes effect in 2015.
Ensure affordable premiums for employees. Premiums for your employees cannot exceed 9.5 percent of their household income and insurance plans must meet the “minimum essential benefits” requirement in the law.
Fines for non-compliance. Although, the law states that no employer is required to offer health coverage, there’s a catch. If you employ over 49 full-time workers, and do not offer and subsidize health insurance as required, you must pay and annual fine of $2,000 to $3,000 per employee.
Restrictions on insurance plans. Insurance companies cannot turn you down based on employees’ health status or pre-existing conditions. Further, they’re prohibited from charging higher premiums for women or increasing the group premium for workers with high medical costs.
Advocates of the ACA claim it will reign in healthcare costs by keeping premiums low and creating a path by which every citizen can become insured. They feel that it will allow businesses to truly assess the pros and cons of offering coverage to their employees without worry that they’ll leave their workers in the lurch should they choose not to offer insurance.
Many strongly oppose the law, however, saying that the mandate for firms with 50 full-time employees will keep smaller firms from hiring that 50th worker to avoid the catch-22 of “either provide coverage or pay a penalty.” Michael Tanner, a senior fellow at the Cato Institute, explains that all premiums will rise in cost under the law. In the past, he says, insurance companies charged more for women to cover the immense costs associated with pregnancy and delivery. Now, they’ll just raise the price for everyone. Advocates believe the law will force insurance premiums to remain steady and predictable. Tanner adds that, while this may prove true, the premiums will also be higher. A number of studies suggest that premiums in the small group market could increase as much as 50 percent.
Help is available.
For very small businesses, there’s a tax credit available. The Small Business Health Options Program (SHOP), increases the maximum tax credit for employer provided health care from 35 to 50 percent, provided the employer meets certain criteria.
SHOP tax credit requirements:
Employ fewer than 25 full-time employees.
Average annual wages for employees are less than $50,000.
You pay for at least 50% of your employees’ premium costs.
Your business participates in SHOP program.
You can offset the cost of insurance premiums by encouraging healthy lifestyles in your employees. You may choose to do this by paying for part of a gym membership or launch a company wellness program where employees receive wellness advice and coaching from a health and wellness expert. Another option is to hire a benefits consultant to educate employees about their health care options and show them how to properly price out procedures and medications to get the most bang for their bucks.
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