Whether you’re excited or upset about the sweeping health-care legislation that the President signed into law in March (the Patient Protection and Affordable Care Act, and the Health Care & Education Reconciliation Act), you need to know what it will mean to your business.
Here’s a brief “cheat sheet” on what the healthcare reform means for your business:
Although many features of the plan won’t take effect until 2014, here are some immediate changes that may affect you:
- The law will establish a temporary national high-risk pool to provide health coverage to individuals with pre-existing medical conditions. States can also set up their own high-risk pools.
- Effective immediately, insurers can no longer put lifetime limits on insurance coverage or cancel policies (“rescission”) unless they can prove fraud.
- Tanning salons will face an additional tax of 10 percent on the amount paid for indoor tanning services.
You do not have to begin offering your employees insurance if you don’t currently do so. However, if you choose to offer insurance, there’s an immediate tax benefit for small businesses with fewer than 25 employees.
- If your business has 10 or fewer full-time employees who make less than $25,000 a year on average, you can get a tax credit of 35 percent of the cost of health coverage.
- If you have 11 to 25 workers with an average wage of up to $50,000, you can receive partial tax credits.
You can continue getting this tax credit (increasing to 50 percent) for the first two years after 2014 if you use SHOP Exchanges (more on those below) to buy insurance. The SBA has estimated that about 4 million small businesses will benefit from the tax credits. (You can find out more about health-insurance related tax credits on the IRS website.)
By 2014, states must set up Small Business Health Options Programs, or “SHOP Exchanges,” where small businesses can pool to buy health insurance. (Currently, small businesses are defined as 100 or fewer employees, but states can redefine them as having 50 or fewer employees.) States will be eligible to get federal aid to set up SHOP exchanges as early as 2011. The Congressional Budget Office estimates purchasing through SHOP would decrease businesses’ costs by 1 percent to 3 percent. By 2017, businesses with over 100 employees will be able to buy insurance through SHOP Exchanges.
Other changes taking effect in 2014:
- If you have more than 50 employees, you must either provide health-insurance coverage or pay fines.
- Insurers will be prohibited from setting rates based on pre-existing conditions.
How to Stay Informed
The health reform legislation is complex, and many details are still being worked out. There are also legal challenges being made to some provisions of the legislation (we’ll report more on this later). I consider it likely that some things will change before all is said and done. So, continue to follow developments as they unfold.
Meanwhile, talk to your insurance provider and accountant to assess how the changes will affect your business now and going forward.