The Affordable Care Act:
What It Means for Small Business Owners
Under health care reform, small business owners who do not offer health insurance to their employees will have more choices. Some small businesses may qualify for tax credits to offset part of the premium cost.
Starting in 2014, businesses with up to 50 workers may be able to buy health insurance for their employees through the health insurance exchanges.
The exchanges will offer a range of health plans. All health insurance plans in the exchange must cover essential benefits, which include hospitalization, medical care, prescription drugs, mental health services, and rehabilitation services among others.
The exchange for small business is called the Small Business Health Options Program (SHOP).
Tax Credits for Qualified Businesses
If you are a small business owner, you may be able to get tax credits to offset part of the cost of offering health insurance to your employees. An estimated 2.8 to 4 million small businesses will be eligible for the credits.
To be eligible for the tax credit, your business must have 25 or fewer employees whose average annual wage is under $50,000. Your business must also pay for at least 50% of the premiums for health care coverage for your employees.
The amount of the tax credit depends on how many employees you have and their wage.
ü The full credit is available to businesses with 10 or fewer employees and average annual wages up to $25,000. The full credit will help pay for 35% of your premium expenses. In 2014, the value of the credit will increase to 50% of premiums.
ü Tax credits are also available to firms with 10-25 employees and average annual wages between $25,000 and $50,000. The amount of the credit will be based on the number of employees and their wages.
ü Small nonprofit organizations are also eligible for the tax credit, but the amount of the credit is limited to 25% of health insurance premiums. The credit will increase to 35% of premiums in 2014.
Visit www.irs.gov to learn more about guidelines for the small business tax credit.
Please take a moment to read some additional helpful information about the Affordable Care Act:
Health Care Reform Time Line
Small Employer Health Care Reform Tool Kit
Large Employer Health Care Reform Tool Kit
For employers with over 50 employees, our “Play or Pay” calculator is a useful tool to determine if your plan includes essential health benefits required by the Affordable Care Act. It can also be used to calculate any penalties you may incur if you do not offer a qualified and affordable health plan.
HCR Pay or Play Calculator
If you have any questions, please do not hesitate to contact our Assistant Vice President for Employee Benefits, Chad Granger. He can be reached at 800 233-7988 ext. 112 or via email: firstname.lastname@example.org.