Small Business Health Insurance

The Affordable Care Act: how much is this thing going to cost me anyway?

As a business owner you need to weigh everything carefully  against the bottom line and plan as much as possible for the future. Any  uncertainty is cause for long days and sleepless nights sweating what might  happen.

Which brings us to the Affordable Care Act. The historic health  care reform legislation promised near universal health care for Americans by  2014 when it was passed in March 2010.

Now after surviving a challenge in the Supreme Court last year,  the implementation of the legislation’s major provisions is less than a year  away on Jan. 1, 2014.

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Regardless of which side of the aisle you identify with, the  Care Act is set to become the law of the land and  the clamor from the small business community  has been getting louder and louder seeking clear, definite answers to questions  about how the legislation will impact them.

Most of those questions all boil down to one thing:

“How much is this thing going to cost me?”

In July the Obama administration responded to the concerns of  the small business community  by choosing  to delay the implementation of the Care Act’s employer mandate until 2015. Even  so, that extra year will go quickly and it’s important for business owners to  familiarize themselves with what to expect in 2015.

Number of Employees and Health Insurance

The number of people you employ will make the difference on  whether you are required to offer them health insurance or not.

Basically if you have less than 50 full-time employees then you  do not need to offer them a  health insurance option. There will be no penalties assessed on your business  for not offering health care.

For those businesses with 50 or more full time employees who  choose not to offer a health care plan they will have to pay a penalty of  $2,000 for each full time worker minus 30, according to the Kaiser Family  Foundation.

People employed at small businesses thatchoose not to offer a  plan will, in principle, be able to purchase coverage at one of the state  health insurance exchanges being set up across the country. Enrollment for  coverage through a plan in the exchanges begins in October 2013 for coverage  beginning in 2014.

But what is a full-time employee?

Well, under the Care Act a full-time employee is anyone who  works at least 30 hours a week for a maximum of 40 hours a week (2,080 hours a  year). The number of full-time employees in a business is calculated using the  total hours worked by all employees.

Is this confusing yet? Allow me to illustrate with an example.

Your business employs five people let’s say. Two of them are  part timers working 20 hours a week (1,040 hours a year), two are full timers  working 40 hours a week, and one employee works 45 hours a week (2,340 hours a  year).

Now it would at first glance look like you have three full time  employees and two part timers, right? Almost, sort of.

Since the Care Act measures full time employees based on the  number of hours worked, this example business actually employs four full time  workers.

2,080 hours total for our two part time employees working 20  hours a week.

  4,160 hours total for our two full time employees working 40  hour a week

  2,080 hours total for our one overachieving employee working 45  hours a week *note, this employee was paid for  the 45 hours a week but only counts under the Care Act for 40 hours a  week. 

Total hours worked by  all employees at example business: 8,580

8,320 divided by 2,080  (the maximum number of hours for any employee) = 4 *note, if your total number of employees does not work out to be a whole  number, you would just round down to the near whole number

So in this example, although at first glance looks like it  employs three full time workers, under the Affordable Care Act calculations for  businesses, they actually have four full-timers.

Tax Credits

So why does this matter? If I have less than 50 full time  employees, why does it matter how many employees I technically have under Care  Act’s definitions.

Well if you are a smaller employer with 25 or fewer full-time  workers that have average salaries up to $50,000 a year then you could be  eligible for a tax credit if you choose to provide your employees with a health  insurance plan.

The credit could cover up to 35 percent  of the business’s eligible premium expenses  for tax years 2010–2013.

Businesses with 10 or less full-time employees, paying annual  average wages of $25,000 or less will qualify for the maximum credit. Starting  in 2014 this tax credit goes up to cover up to 50 percent of those costs. and  is good for two years.

It’s  important to note here that even though the Care Act’s employer mandate is  bring delay until 2015, these tax credits will still in place next year.

While the Care Act’s full implementation, the small business  community caught a lucky break with the delay of the employer mandate. As we  get closer to 2015, hopefully things will become more solid and notions that  the Care Act will adversely affect the economy will turn out to be unfounded.

This article was contributed by Michael  Cahill, Editor of the Vista Health  Solutions blog. Michael has a  degree in Journalism from SUNY New Paltz. Previously he worked as a reporter  for the Poughkeepsie Journal and as an editor for the Rockland County Times.

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