There has been no shortage of controversy around the Affordable Care Act, especially for small business owners.
The debate of whether or not the health care requirements will boost or bust small businesses rages on, but the deadline for business owners to provide their employees with coverage gets nearer every day.
For those of you struggling to understand what is required under the new law, here’s a basic breakdown:
Your Small Business Might Not be Affected
The good news: If you’re just starting your business, you’re probably not affected at all by the law. By 2015, small business owners with 50 or more full-time employees will be required to provide insurance. Although business owners with fewer than 50 employees are not legally required to provide insurance, they can qualify for a special tax credit if they offer health insurance that meets the minimum requirements under the Affordable Care Act.
Small business owners who decide to provide insurance through the government can look for plans through a small group health marketplace, or the SHOP Marketplace. This option is available for businesses with 50 or fewer employees through 2015. In 2016, it becomes available for businesses with 100 or fewer employees. The idea behind this special marketplace is to provide small businesses with more cost-efficient insurance plans.
It’s Not How Many Employees You Have But How Much They Work
A key component of the Affordable Care Act is classifying a full-time employee as someone who works 30 hours each week instead of the typical 40 hours. This was done to discourage employers from reducing hours to lower their number of full-time employees, as many national businesses threatened to do when the law passed.
Counting hours, not employees, means businesses with fewer than 50 employees might still have to offer insurance. For example, if you record 40 employees who each work 40 hours per week, your hours will technically rank your business as one that employs more than 50 workers, meaning you’re required to provide insurance.
Some Businesses Might See Higher Costs
Any business that earns more than $250,000 annually is required to pay a Small Business Medicare tax of 0.9 percent. It is also estimated that coverage costs will rise 3-4 percent to account for compliance with additional Affordable Care Act regulations.
If an employer refuses to provide health insurance that meets the law’s minimum requirements, he or she will be fined $2,000 per employee annually or must pay 60 percent of employees’ personal insurance premiums, whichever is less.
The law does offer special tax breaks of up to 35 percent for small business owners, but only through 2016. Hiring more employees or raising wages can impact your tax break.
The debate about the Affordable Care Act will likely carry on for years. Whether you agree with the requirements or not, all business owners must take steps to ensure they are meeting the requirements laid out in the law, but this is especially important for small business owners who don’t have the resources or time to fight the law.