Businesses & The ACA
Since the Patient Protection and Affordable Care Act (ACA) was signed into law in 2010, much as been made about the legislation's impact on the health care of individuals. However, the law also affects employers in a number of significant ways.
Employers who were already providing coverage
Many small businesses were already offering health insurance packages to their employees before the ACA was passed. In 2011, approximately 72 percent of small businesses had at least one health insurance plan. These plans are accepted, or grandfathered in, under the ACA. [1]
For these companies, the law allows them to keep their old plan if they wish, and these businesses will not be subject to the new requirements of the law, including those requiring coverage of preventive services and essential health benefits. [1]
Small Business Health Options Program (SHOP)
For small business owners who wish to change their coverage plans, or for those who did not offer health insurance before the new law, the Affordable Care Act establishes the Small Business Health Options Program or SHOP. SHOP allows employers to compare and shop for quality insurance plans side by side for their staff. [2] Many small business owners may access SHOP through their state exchange. For everyone else, SHOP is available through the federal exchange.
The self-employed
Individuals who are self-employed also qualify as a small business. Under the ACA, self-employed individuals will be mandated to purchase their own health insurance or be subject to a tax penalty of up to 2.5 percent of their income. [2] To help pay for the costs of premiums, the ACA will establish a premium tax credit which will provide advance payments to lower monthly health care premiums. Those with incomes under 400 percent of the Federal Poverty Level ($45,960 for an individual in 2013) will qualify for the premium tax credit. The poorer the individual, the higher the premium tax credit, with the poorest individuals having all or nearly all of their premiums paid for in advance.
Businesses with fewer than 50 full-time employees
Under the ACA, small business employers with fewer than 50 full-time workers, or full-time equivalent workers, will not be required to offer health insurance to their employees. (Check here for a definition and calculator to determine who qualifies as a full-time employee). [2] However, the ACA encourages small business employers to provide health insurance by offering small business health care tax credits. [1]
To qualify for small business health care tax credits, businesses must have fewer than 25 full-time equivalent employees, pay average annual wages below $50,000 per full-time equivalent employee, and contribute at least 50 percent of each employee's premium. Owners are excluded, and should not be counted in number of employees, wages, or premium contribution amount. Tax credits can't be larger than actual income tax liability.
Businesses with 50 or more full-time employees
Businesses with 50 or more full-time workers, or full-time equivalent workers, are required to offer health insurance or be subject to penalty under the Employer Shared Responsibility provision of the ACA. [2]
Summary
Small businesses that offered health insurance to their employees before the ACA are grandfathered in and allowed to keep their old plans. Small business owners who did not offer health insurance are encouraged to do so through health care tax credits. Larger companies with 50 or more full-time employees are required to offer health insurance or be subject to a penalty.
[1] http://kff.org/health-reform/fact-sheet/explaining-health-reform-how-will-the-affordable-care-act-affect-small-businesses-and-their-employees/
[2] http://www.sba.gov/community/blogs/7-key-terms-affordable-care-act-small-businesses-should-know
Ryan Witt is a freelance writer covering all things St. Louis Cardinals. His work can be found on Examiner.com.
