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What Health Care Reform Means for Small Business

How will health care reform affect small businesses? In quite a few ways, it turns out. We sifted through the bill to provide you with the most important small business-related facts.

How does the government define a small business? According to the federal government, a small business is company with fewer than 100 employees. Your state may define a small business differently, eg. as a company with fewer than 50 employees. Check with your state to be sure.

Who gets the most tax credits?
Very small companies (10 or fewer employees) with low-wage workers.

Who should worry? Companies with more than 50 employees–you won’t get any tax credits. Companies who provide their employees with “Cadillac” health insurance (it will be taxed at 40% starting in 2014). Anyone who likes to be sneaky about cutting costs–the gub’mint will issue handsome fines if they find you’ve avoided their insurance requirements.

Starting this year:

You can get a 35% tax credit if you have 10 or fewer employees, and they earn less than $25,000 on average.

You qualify for a smaller tax credit if you have 25 or fewer employees with an average wage $50,000 or less.

You don’t get a tax credit if you have more than 25 employees. Also, any employee who earns more than $80,000/year will be excluded from your credit.

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Starting in 2014:

States must set up health insurance pools called SHOP exchanges (Small Business Health Options Programs). These allow small businesses to group together to buy health insurance.

You could receive a 50% tax credit if you’re a company with 10 or fewer employees who earn less than $25,000 on average.

You will be penalized $750 per full-time employee if you’re a company with 50 or more employees, and you don’t provide health insurance. The government won’t charge you for the first 30 workers you don’t cover.

You will not be penalized if you have fewer than 50 employees.

You face additional fines if you don’t cover 60% of overall employee health costs, as well government-defined set of services.

If you pay more than $10,200 per year
for your individual employee’s health coverage, or more than $27,500 for family health coverage, the government will charge your insurer a 40% excise tax on the portion you pay that exceeds the amounts above. That means higher premiums for you–or your employees. Dental and vision isn’t included in the tax.

How much do you have to cover?

If you offer your employees health insurance:

* You must cover no less than 72.5% of the cheapest health plan you offer for individuals, and no less than 65% for families.
* You must automically enroll every employee in a health plan with the lowest employee premium, unless they opt out.

If you choose not to provide health coverage:

*You must pay the Health Choices Commissioner (the person in charge of the SHOP exchange fund) 8% of the average wages paid during a predefined period of enrollment. They charge you a lower percentage if your annual payroll is less than $400,000.

They bust you if:

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*You don’t cover your employees and don’t pay your SHOP fee. You’re fined $100 per violation day.
*You try to entice a high-risk (sick) employee away from company-provided insurance and towards the SHOP to try to save yourself money.

Also note:

If you operate as a partnership, each partner counts as an employee.

There are a few House amendments that the Senate may pass this Sunday. If they pass, it means that:

-The penalty for not providing insurance will go up to $2,000.
-Part-time employees will count towards that 50 employee limit.
-If you buy your employees “Cadillac” coverage, you won’t face that 40% tax until 2019.

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