What Your Business Needs to Know About the Affordable Care Act

February 3, 2016 Leena Thampan

Affordable Care Act

You have probably heard of the Affordable Care Act (ACA), which is the first health reform act responsible for the largest middle class tax cut in history.

An Overview of the Affordable Care Act

More commonly known by its nickname ObamaCare, the purpose of the ACA is to reform existing health care practices by giving consumers more control over what they pay for their health care while also preventing insurance companies from denying coverage for pre-existing conditions.

The highlights of the ACA are as follows:

  • Unless you have a grandfathered insurance plan, all Americans can enjoy the new benefits and protections that have been put in place with the ACA. If you have a plan that was started after 2010, but before 2014, you may need to get a new ACA-compliant plan to get the same benefits and rights.

  • Affordable insurance is a key tenet of this act, which will help the over 30 million uninsured Americans get access to affordable health care.

  • The health insurance marketplace pools all Americans together indiscriminately to give them competitive plans and get better prices.

  • By enforcing a Minimum Essential Coverage in 2014, the ACA ensures that Americans will not face discrimination on the basis of gender, age, or even health status. However, Americans who cannot afford the Minimum Essential Coverage will not be required to do so. It is recommended that you sign up for an account in the Health Plan Marketplace to determine if you qualify for any exemptions.

Now that you have a basic understanding of the ACA, let’s discuss how  affects your small business and your employees. What are your responsibilities as an employer? We’ll cover that and more as we discuss the Small Business Health Options Program (SHOP) in more detail.

$hopping for Coverage

The mandate of the ACA is to ensure that all Americans have access to affordable health care. Small businesses and their employees are no exception.

If you are a small business with <50 employees, you can now offer your employees health and/or dental coverage through the SHOP Marketplace. To use the SHOP Marketplace, you have to be a small business with at least one full-time employee, which cannot include owners, partners or members of your family.

Self-employed business owners with no employees can use SHOP to purchase coverage, but they have to purchase a plan under the Individuals & Family category.

There are benefits to purchasing coverage through the SHOP Marketplace:

  • You get access to quality plans from private insurance brokers.

  • You have increased flexibility by offering your employees one plan or many, the amount you choose to pay towards employee premiums, whether or not dependants are included and more.

  • SHOP is a cloud-based insurance marketplace, which means that you can manage all the aspects of your insurance plan online.

  • If you have a great relationship with your current agent / broker, you can keep that as it is; or if you prefer to handle it all by yourself, you can do that as well. You don’t have to pay any extra costs for using an agent / broker.

  • And the biggest benefit of all - the tax breaks for small businesses with <25 employees. You can get up to 50% of your premium costs back in credits, depending on the number of employees.

Starting in 2016, you can now offer your employees a choice from multiple plans within a coverage category, and you can also decide if you want to provide health and/or dental coverage.

And depending on the state where your main business is located, it has become easier for a small business to hit the Minimum Participation Rate for the SHOP Marketplace by including employees with other health coverage i.e insurance through another job, the Health Insurance Marketplace, etc.

Qualification Criteria to use the SHOP Marketplace

There are four mandatory requirements your small business must meet in order to use the SHOP Marketplace to purchase coverage.

The first two requirements relate to full-time employees, who are classified as employees who work over an average of 30 hours a week for over 120 days in a year.

  • Your company should have 50 or less employees with a full-time status. The FTE calculator will help you determine if your small business qualifies for SHOP.

  • Only your full-time employees have to be offered mandatory coverage under the plan.

  • As per the minimum participation requirement in most states, at least 70% of your employees have to either enroll in your plan or have insurance coverage from a different source.

    • It is only between the period of November 15 to December 15 in any year that a business, which does not meet the minimum participation requirement can enroll in SHOP coverage.
  • Assuming your business does not operate / employ workers in multiple states, the final qualification you need to participate in the SHOP Marketplace is to have an office / work site in the state where you want to get SHOP coverage.

Working with Registered Agents or Brokers

The SHOP Marketplace certainly makes it easy enough for a small business owner to handle all aspects of the enrollment by themselves, but if you are strapped for time, it might make it easier to work with a licensed insurance agent / broker who is registered with the SHOP Marketplace.

While you are still responsible for paying the premium payments directly, an agent / broker can help you:

  • Check if your business is qualified under the SHOP Marketplace requirements

  • Determine if your business is eligible to receive tax credits for providing coverage through the SHOP Marketplace

  • Complete your application in the SHOP Marketplace

  • Review and compare plans

  • Keep track of which employees have accepted / declined coverage

  • Enroll your business in a health and/or dental insurance plan

  • Make updates to your coverage after enrollment, and lastly,

  • Take care of all plan changes and renewals

Get Paid to SHOP

The adage that big things come in small packages could not be more true in this case. The smaller your business, the bigger the tax break.

To incentivize small businesses <50 employees to provide their full-time staff with health and/or dental coverage, the government is offering a tax break ‘worth up to 50% of [the] contribution toward [their] employees’ premium costs (up to 35% for tax-exempt employers)’.

Similar to the mandatory requirements in place to use the SHOP Marketplace, there are specific criteria you have to fulfil as per the eligibility requirements for the tax credits.

  • Your business should employ less than 25 full-time employees, whose full-time status is classified based on working an average of 30+ hours / week for 120+ days in a year.

  • The average annual salary of an employee should be $50,000 or less.

  • You cover about 50% of the premium costs for your full-time employees.

  • All your full-time employees are offered coverage through SHOP.

And all you small business owners who employ under 10 full-time employees -- good news - the tax credit is highest for you as long as your < 10 employees make an average annual salary of $25,000 or less.

If you meet the eligibility criteria, use the Tax Credit Estimator to see how much of a tax break your small business could get using the SHOP Marketplace.

And on that note, stay small and stay healthy!

About the Author

Leena Thampan

Leena worked for some of the big guns in the media industry before deciding her true calling was to be the ultimate curator of our brand - this is our version of the story, of course. She spends her days cooking culinary masterpieces from all over the world. And if you are not really careful, she might just offer it to you.

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