Small Businesses and the Affordable Health Care Act
Growth is the goal of all entrepreneurs when starting a business. You want to grow beyond yourself and help from family and friends, and as you have sales, you are then able to hire staff. This is great news, and to be celebrated. There are some things you will need to be aware of as you grow so you are in compliance with the law. The passage of the Affordable Health Care Act will directly impact your business as you grow.
Although there is great value in providing health insurance to your employees, it can be a difficult challenge for small businesses. On average, small businesses pay close to 18% more than large firms for identical health insurance policies, in addition to lacking the purchase power of larger employers. The new health care law provides tax credits and the ability to shop for insurance in Exchanges that will help bridge this gap.
What this does this mean for Entrepreneurs?
- If you have up to 25 employees, pay average annual wages below $50,000, and provide health insurance, you may be eligible for a small business tax credit up to 35% (up to 25% for non-profits) to offset the cost of your insurance.
- Under the health care law, employer-based plans that provide health insurance to retirees ages 55-64 can now get financial help through the Early Retiree Reinsurance Program.
- Beginning in 2014, the small business tax credit will increase to 50% (up to 35% for non-profits) for qualifying businesses.
- Small businesses with generally fewer than 100 employees can shop in an Affordable Insurance Exchange, which gives small businesses the power comparable to large businesses to get better selection and lower prices. An Exchange is a new marketplace where individuals and small business can buy affordable health benefit plans.
- Exchanges will offer a choice of plans that meet certain benefits and cost standards. Members of Congress started getting their health care insurance through Exchanges, in 2014, and you will be able to buy yours though Exchanges as well.
- Employers with fewer than 50 employees are exempt from the newer employer responsibility policies. If their employees get tax credits through an Exchange they do not have to pay an assessment.
Overall, it’s important to make sure you understand how the new law will affect your business from a “compliance” and “cost” stand point. Do your homework now so you can prepare for each of these changes.