What Every Business Owner Should Know About Health Insurance

In our last blog post, we discussed the key business insurance policies every small business owner must consider for his or her business. Today, we shift our attention to health insurance. Although there has been recent attempts to revise or replace the Affordable Care Act (derisively referred to as Obamacare by critics), it is still the law of the land and every small business owner must understand how the rules and regulations will affect their business.

Some enterprising small businesses are seeking out a business cash advance to defer the expense of providing additional insurance coverage for employees, this may be a smart way to cover the unexpected costs of a growing business.

The Affordable Care Act or (ACA) which was put into legislation in 2010, allowed for open enrollment for affordable health insurance marketplaces for both individuals and businesses in October of 2013.  While the purpose of the ACA was to help millions of uninsured Americans, for many small businesses, the ACA proved to be confusing – mostly due to the fact that it has a myriad of rules and regulations that are implemented over time.  So, this article will deal with what exactly does the ACA mean for small businesses now and in the near future?

Going back a year, as stated, in October 2013, it was deemed that any small businesses with 25 or over Full Time Employees (FTEs) were required to pay employee health insurance.  Many small businesses panicked and tried to change out their employee’s status to that of consultants or split their business into multiple different locations – so that each locale would have less than 25 FTE’s.  The problem is, those actions are illegal and non-compliance to the tenants of the ACA could lead to the company being fined.  The fact remains, a small business with 25 or more FTE’s, regardless of how many locales a business operates, and how many FTEs are in each location,  still must adhere to the laws of the ACA.

Now small businesses are starting to understand the ACA and compliance has been easier as a result.  There are many benefits to the ACA including tax breaks, and the following are some facts and opportunities for small businesses of different sizes:

Small Businesses with Less than 25 Employees – The Disclosure Rules:

If you are a small business with less than 25 FTEs, your obligation is relatively simple:  You must provide information on where employees can find health insurance, but the small business owner is not obligated to pay for it.  This may change over time.

The Small Business Administration (SBA) writes, “…employers … must provide notification to their employees about the new Health Insurance Marketplace; inform employees that they may be eligible for a premium tax credit if they purchase coverage through the Marketplace; and advise employees that if they employee purchase a plan through the Marketplace, they may lose the employer contribution (if any) to any health benefits plan offered by the employer.”

That said, while a business with under 25 FTE’s were not obligated to pay for employee benefits there are certainly incentives to do so.  According to the SBA, when the ACA came about in 2010, certain small businesses that were eligible, and provided health insurance, were offered a tax credit of 25-percent.  In 2014 the tax credit rose to 50-percent.

The tax credit “…is available to qualified small employers that participate in the Health Insurance Marketplace for small employers known as Small Business Health Options Program (SHOP).”

Small Business with 25 or More FTE’s:

Small businesses with 25 or more FTE’s are obligated to pay for health insurance as well as provide employees with a standard “Summary of Benefits and Coverage” form explaining what their plan covers and what it costs.  The purpose of the SBC form is to help employees better understand and evaluate their health insurance options.  For more information, visit http://www.dol.gov/ebsa/healthreform/regulations/summaryofbenefits.html.

For those businesses with closer to 50 or more, companies can offer their employees the new Health Insurance Marketplace specifically through the Small Business Health Options Program (SHOP).  According to the SBA, “Currently, small businesses pay on average 18% more than larger businesses for health insurance.  The SHOP Marketplace offers small employers increased purchasing power to obtain a better choice of high-quality coverage at a lower cost.  Costs are lowered because small employers can pool their risk.”

Businesses interested in SHOP may call: 1-800-706-7893 (TTY users: 1-800-706-7915) Monday through Friday, 9 a.m. to 7 p.m. EST. For more information, you can also refer to these FAQs

Insurance Companies:

The ACA also changed the ways insurance companies operate and in some caes, many feel for the better.  Now, insurance companies must spend at least “…80% of premium dollars on medical care” rather than on administrative costs”, according to the SBA.

Additional Medicare Withholding on Wages:

The ACA also provides additional Medicare withholdings.  Employees can now  increase the employee portion of the Medicare Part A Hospital Insurance (HI) withholdings by .9% (from 1.45% to 2.35%) on employees with incomes of over $200,000 for single filers and $250,000 for married joint filers.

90-Day Maximum Waiting Period:

Have you ever started a job and found you had to wait at least three to six months to be eligible for benefits?  Under the ACA: “… individuals who are eligible for employer-provided health coverage will not have to wait more than 90 days to begin coverage.  The IRS has provided temporary guidance on how employers should apply the 90-day rule and is expected to provide more information in the near future clarifying these rules.”