Answers to Your Small Business Questions Concerning Healthcare Reform

​This year, several new parts of the recently passed Affordable Care Act as it applies to small business will take effect. This means that the time is now to prepare your business for the changes in how you provide coverage to your employees.

​With so much confusion surrounding what healthcare reform will actually do, small business owners have found themselves with more and more questions that are hard to get straight answers on. To help, here’s a few clear answers to some of the most common questions small business owners have about the Affordable Care Act:

Q: Do all small businesses have to participate in the Affordable Care Act? Can I opt out?
Whether or not you are required to offer insurance to your employees depends on the size of your business. If you have less than 50 full time employees, then you are not required to offer health insurance under the Affordable Care Act. 

The system, however, works a bit differently than simply requiring participation. Instead, there is now a system of penalties and incentives, like tax breaks, to encourage small businesses to take part in the initiative. Again, if your small business employees under 50 full time workers, no penalties will be assessed for not offering health care coverage.

The responsibilities, obligations, benefits, and penalties as they pertain to businesses with more than 50 employees is different depending on several factors about the companies themselves.

Q: Are there any tax credits from healthcare reform my business is eligible for?
This is one of the most commonly asked questions by small business owners and it makes sense why. The answer is that yes, some of the companies that participate in the Small Business Health Options Program (SHOP) may indeed qualify for tax credits. 

The criteria for qualification is as follows:

• The average annual wages of all FTEs should be less than $50,000 annually.
• Your business should have 25 or fewer FTEs for the tax year in question.
• You must pay at least 50% of all insurance premiums for your FTEs.
• You offer your FTEs health coverage through the SHOP marketplace.

The resulting tax breaks, if your business qualifies, could be as much as half of what your business spends on premiums for healthcare coverage. Additionally, very small businesses, that is those with 10 or fewer FTEs can qualify for full credit of the premiums they pay for their FTEs.

If you own a tax-exempt business, there are two important notes you need to be aware of in order to claim your tax credit:

• Tax-exempt businesses can only earn up to 35% of the premiums they pay as tax-credit.
• All tax credits issued after September 30th of 2015 will be reduced by an additional 7.3% for sequestration.

Q: Is my business considered a “small business” by the Affordable Care Act?
The IRS defines a small business as any with no more than 50 FTEs. This exact number may also differ from state to state, but this 50 or fewer qualification is what the Affordable Care Act uses to determine which businesses are eligible for the SHOP marketplace.

SHOP exists to streamline the process an employer goes through to buy and offer employees health coverage. Employers who are qualified can purchase insurance at any point during the year.

Self-employed business owners who are the sole proprietor are classified as individuals, not small businesses and therefore do not qualify for SHOP. However, these business owners do qualify for other programs like individual health insurance marketplaces and state healthcare programs. 

Q: What sort of penalty is there for non-compliance?
If you have less than 50 FTEs, there are no penalties at all you need to worry about. If your business employees more than 50 FTEs, then there may be penalties for failing to offer adequate coverage.

Individuals who own their own business may incur penalties if they don’t have health insurance at the same rate any individual who doesn’t have health insurance will be penalized:

• Children under 18: $162.50 per person
• Adults: $325 per person.
• 2% of the household’s annual yearly income

One of the most common myths about Health Care Reform is that small businesses will be penalized for not offering coverage. To be clear, only entrepreneurs who are not already otherwise properly ensured are the only small business owners at risk of penalty for not enrolling in healthcare, and that is only in certain circumstances.

To Sum it up…
Beyond compliance, small businesses that offer competitive health insurance benefits to employees are able to attract top-talent and more loyal employees. The bottom line is offering quality health insurance to your employees offers several advantages to the possible savings from not offering coverage. 

Still have questions? 

Please call us for a free appointment with Miami business attorney Yoel Molina in our Miami office at 305-548-5020.