The Affordable Care Act for small businesses
As part of the comprehensive health care reform currently taking place, the Affordable Care Act (ACA) was signed in 2010 and will continue to be implemented over the coming years. The act involves two provisions which affect both Medicaid and the individual. For the individual provision, the Affordable Care Act aims to ensure that minimal and essential health care coverage is available for all, from the year 2014 and onwards. This provision is known as the ‘individual’ mandate. Under this provision, health care coverage must be made available by certain employers. Alternatively, the individual may purchase health insurance through private individual insurance plans, new health care exchange plans, and other federally sponsored plans such as Medicare or Medicaid. The ACA aims to provide affordable access to health insurance.
The ACA will impact employers differently depending on the size of the company, the current state insurance regulations, workers’ wages, and whether the employer currently offers insurance. Currently, employer sponsored health insurance is the most common form of insurance utilized by individuals. Changes under the Affordable Care Act, may allow certain companies to purchase coverage through new health insurance exchanges and allow tax credits for small businesses. In addition, they may employ penalties for certain companies who fail to offer coverage, in particular affordable coverage. Up until recently, employers have offered insurance as an incentive to retain workers. Affordable health coverage for purchase by individuals through the private market has not been available, particularly for those with pre-existing conditions.
As a result of the Affordable Care Act, many employers are determining the cost effectiveness of whether to continue providing health care insurance under the new exchange plans, or to drop coverage and face penalties. Small companies are encouraged to offer or to maintain health care insurance through the provision of tax credits. Small businesses which employ less than 25 full time equivalent employees are not required to provide health insurance. However, small business tax credits will be made available for employers who decide to begin to provide health care or to continue to provide coverage. Other eligibility requirements include employing workers with an average annual wage below $50,000, and that employers must contribute 50% or more towards employee’s health care insurance premiums. From 2014, small employers will have the option to buy coverage through ‘Small Business Health Option Programs (SHOPS), offering employers a variety of qualified health plans (QHP). These health plans simplify choices for employers, allowing for a side by side plan comparison, expand choices for employees, and lower employer costs. Beginning in 2014, each state will institute an affordable insurance exchange program, a competitive health insurance marketplace allowing individuals and employers to shop for and find affordable health care coverage.