Health Care Reform Unpdate

The Impact of Health Care Reform on Small Businesses

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, a landmark legislation reforming health care in the U.S. While this newly-enacted law will affect healthcare insurance coverage for millions of workers, many companies are wondering what is to be expected. Some of the elements of the law will not take place for a few years, but other features will take place almost immediately. Small business owners need to consider a number of provisions and implications, such as:

Company Size

• Employers with fewer than 50 employees would be exempt from coverage provisions, but those that do offer health insurance coverage could get tax credits to offset their costs.
• Employers with 50 or more employees are not obligated to offer health insurance coverage; however, the new law would place tax penalties on businesses that do not provide coverage.
• Note: Each state may define a small business differently; so, check with your state to confirm.

Effective This Year

• 35% tax credit for employers with 10 or fewer employees earning an average of less than $25,000.
• A smaller tax credit for employers with 25 or fewer employees with an average wage $50,000 or less.
• No tax credit for employers with more than 25 employees.

Effective 2014

• Small Business Health Options Program (SHOP) exchanges of health insurance pools must be established by states such that small businesses will be able to group together and buy insurance in a way to alleviate costs.
• A 50% tax credit for employers with 10 or fewer employees who earn an average of less than $25,000.
• $750 Penalty per full-time employee for employers with 50 or more employees not providing health insurance. (Note: Companies may need to modify any applicable benefit policies, such as PTO and / or insurance, to be in line with the new provisions.)
• No penalties for employers with fewer than 50 employees.
• Additional fines for employers not covering 60% of overall employee health costs as well as government-defined services.

Other Considerations

• Companies with fewer than 25 employees are exempt from so-called “pay or play” requirements. Employers with more than 50 full-time employees will be required to make available a minimum level of coverage or pay a per-employee fee. Employers will not be required to provide coverage for part-time employees, but these employees will be counted as partial employees for purposes of determining whether an employer has 50 employees. The Pay or Play provision become effective 2014 upon the creation of the state-based exchanges.
• Companies offering high cost health plans would pay an excise “Cadillac Tax” equal to 40% of the value of the plan that exceeds the threshold amount. (Note: This is effective starting 2013 in the Senate bill, but the provision would not take effect until 2018 under the House bill.)

Although a number of aspects will take place in four years, starting a plan now could help your business from facing large fines in the future. New legislation can be overwhelming, but it is your duty as an employer to understand and stay on top of all laws relevant to your business. For any guidance especially in terms of employment law compliance, consider the expertise of an HR professional.