By now, most have heard of the Affordable Care Act passed by Congress a while back. Despite its pending arrival, many still have questions about how this will affect their businesses and their employees. We thought we’d take a minute to outline a few of the higher points of this legislation and what it will look like for our clients.
There are 4 key ACA principles relating to small businesses:
First: the creation of insurance exchanges. These exchanges will help individuals and small businesses compare and purchase health insurance plans. While these exchanges are set up to help in the selection of coverage, companies will still have the option of purchasing insurance through a market outside of the exchange. States are required to create and make their individual exchanges available by 2014. Ultimately, these exchanges are estimated to help 2.6 million small business employees secure affordable health insurance coverage.
Second: tax credits. Small businesses with fewer than 25 full-time employees may apply for assistance in the form of tax credits. These tax credits can then be used to offset the cost of health insurance for their full-time employees. There are 2 simple requirements for these credits: first, the average employee salary must be less than $50,000 annually, and second, the company must pay at least half of the cost of their full-time employee’s healthcare coverage. This may prove to be potentially critical assistance for startups and growing businesses in most need of all available working capital.
Third: grants for wellness programs. Small businesses who may have previously been unable to supplement such fringe benefits as wellness programs are eligible for assistance from the government. Companies with fewer than 100 employees working 25 or more hours per week can apply for federal grants to help create a new wellness program. As with any government assistance, there is a proviso: the wellness program must not have been in place prior to March 2010. So, if a company has always wanted to offer a wellness program benefit to their employees, the ACA will help them to start one.
Fourth: penalties for noncompliance. While there is no requirement for small businesses to provide health insurance, starting in 2014, companies with more than 50 employees will begin to be penalized for not offering affordable health insurance. Again, businesses with 50 or fewer employees will be exempt, but those with more than 50 employees will be fined $2,000 per employee for any individual averaging 30 or more hours per week not offered coverage (note, this does not include the first 30 employees). Ultimately, these penalties are sure to serve as an incentive for all small businesses to offer this critical but costly benefit to its employees.
While the actual legislation itself is thousands of pages long, these are the highlights, and “what does it mean to me?” for small business. There is much more documentation available at http://www.healthcare.gov/law/index.html. Hope this helps.