You’ve been hearing about it for months now. It’s all the media can talk about. You’ve read so many articles; your brain doesn’t even know how to process the information anymore. No, no not Miley’s latest drama; we’re talking about the Affordable Care Act. As 2013 comes to an end, it’s time to face the Affordable Care Act and learn how it will really affect your business when the employer mandate goes into effect in 2015. Bear with us, as we give an unbiased look on the key provisions related to small business and the pros and cons of the ACA.
Company Size Categories
First, it’s important to understand that under the ACA there are four different size categories for businesses:
1. Self Employed
2. Fewer than 25 employees
3. 25-50 employees
4. More than 50 employees
This size is based on the number of FTEs (full-time equivalent) employees, which is defined as those working 30+ hours a week, plus total part time hours divided by 30. Seasonal employees and contract temporary employees do not count toward the number of FTE employees.
Small Business Health Options Program (SHOP Exchanges)
Delayed one year, these are state specific online marketplaces where employers will purchase employee insurance in a controlled market. This enables small businesses to provide their employees with better quality coverage that includes the new rights and protections offered by the ACA, while giving them the same buying power as larger firms. The SHOP will offer the same insurance choices and prices to small firms as they will to larger firms.
Obamacare Small Business Healthcare Tax Credit
Small businesses can apply for tax breaks of up to 35% of their contribution to employees’ insurance premiums if they have fewer than 25 FTE employees. To qualify, businesses must pay a minimum of 50% of the premiums and their workers average annual salaries can’t be more than $50,000 a year. Tax credits are available for small businesses on a sliding scale depending on the number of employees and average annual wages. In other words, Obamacare offers small businesses with less than 25 full time employees big tax breaks to provide quality health benefits.
Small Business Insurance Requirements
All insurance provided to your employees must meet the minimum requirements of the ACA. All plans available via the SHOP will automatically meet the requirements, but if you want to keep the current plan you offer, you must make sure it meets the guidelines.
Once the SHOP Exchange is introduced, it will provide small businesses with affordable insurance options and increased buying power. Since businesses with under 50 FTE employees will be able to use the SHOP to get better deals on insurance, but aren’t mandated to do so, small businesses will not be hurt. Here are a few of the benefits:
- The smaller the business, the larger the tax breaks will be.
- Small employers can see up to a 50% reduction in their share of the cost of employee premiums. The amount employers do pay is tax deductible and can be carried forward or backward.
- Due to small businesses being able to shop for group health plans on their State’s Health Insurance Marketplace via the SHOP, small businesses now have the same buying power as larger firms.
- All new “Obamacare taxes” larger businesses and higher income employees pay help to make all the benefits, rights and protections of the law possible including subsidized insurance for low-to-middle income Americans, small businesses, and Medicare.
Negative effects on small business have included employees’ hours being cut, costs passed onto the consumers or shareholders, a reduction in hiring and more out-of-pocket costs for larger businesses. Almost all of the negative effects are due to some employers responding to the looming “employer mandate” in 2015 and thus cutting hours to have fewer FTE employees.
- Some of the larger firms (those with over 50 full-time equivalent employees) and their employees may be affected by some of the new taxes as well as the 2015 employer mandate to buy insurance for full-timers.
- Worker hours are cut back to part-time by larger firms to avoid providing coverage to full-timers.
The Affordable Care Act addresses many small business owners’ top priorities when it comes to healthcare: lower cost and greater accessibility. It’ll provide many more healthcare options for the nation’s entrepreneurs, and small businesses with fewer than 25 employees can expect to see their healthcare costs decrease and quality of coverage increase.
Many businesses are hiring more contract workers, to reduce their number of FTE employees. Remember, the responsibility of healthcare coverage for contract-temporary employees does not fall on you, the employer. If you’re looking to fill positions with contract employees, let Area Temps find you the best talent in the Greater Cleveland Area. Contact your account representative or the office nearest you today.