What Does the Affordable Care Act Mean for Your Small Business?

The Affordable Care Act is coming in 2014, and it has a lot of small businesses wondering about what it means for them and what it will do to health care costs.

The Patient Protection and Affordable Care Act, which was upheld by the U.S. Supreme Court in 2012, addresses health care challenges in this country, including the challenge of insurance premium pricing continuing to increase while the number of companies providing that insurance continuing to decrease.

According to the Kaiser Family Foundation, the cost of employer-provided health-care benefits increased 8 percent between 2010 and 2011. Also, the number of employers providing benefits decreased over the past decade from 58 to 48 percent for businesses with three to nine employees and from 77 to 71 percent for businesses with 10 to 24 employees.

When the Affordable Care Act goes into full effect in 2014, small businesses can expect the following changes:

1. Contribution requirements — Employers with less than 50 employees aren’t required to offer insurance. Those with more than 50 employees will be required to pay 60 percent of the cost for an employee’s “minimal essential coverage.”

2. Affordable premiums for workers — Premiums for each employee cannot exceed 9.5 percent of that employee’s household income.

3. Fines for non-compliance — If your small business employs more than 49 employees who work full-time, again, you’ll be required to offer health insurance or pay an annual fine of $2,000 to $3,000 per employee. If you employee 49 employees or less, you’re exempt.

4. Help available — A tax credit is available under the Small Business Health Options Program Exchange, which increases the maximum credit for employer-provided health care from 35 to 50 percent. There is a limit of five years for these tax credits, and the limit drops to two years after the exchanges go into effect.

To date, proponents of the Affordable Care Act believe health-care reform would result in lower overall insurance costs, as more U.S. residents sign up, while opponents argue that health-care reform will force employers to pay while failing to improve the industry enough to make a difference.

However, studies hint that as the economy improves, employees may expect to either have access to benefits or better pay. A 2011 report [PDF] by McKinsey & Company revealed that even without employer-subsidized health insurance, 85 percent of respondents would continue to work for an employer. However, about 60 percent of those workers stated that they’d expect their pay to be higher to compensate for it.

Employers can offset the cost of insurance premiums by encouraging employees to stay healthy. This is often easier for small businesses, who have a small, close-knit staff. A small business could pay part of gym memberships or set up a wellness program, where employees regularly receive coaching by a wellness coordinator.

By providing employees with helpful options, including flexible benefits plans that allow employees to save pre-tax dollars for health-care costs, small-business owners can offer benefits that will keep workers healthy and happy. If you aren’t a benefits expert, consider hiring a consultant to help employees determine their health-care options, including showing employees how to price procedures and medicines to obtain the best deals.

Want to learn more about how health-care reform will impact your small business? The below infographic from Intuit can help you learn more. Click on the image for the full graphic.

Want to learn more about how health-care reform will impact your small business? The below infographic from Intuit can help you learn more. Click on the image for the full graphic.

Cost Of Care TEASER

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About Anu Sanghvi

Anu Sanghvi is part of Intuit’s Employee Management Solutions team. She lives in the beautiful Bay Area, and loves to hike, swim, and play with her two young kids. She thrives on helping small businesses achieve their dreams. Follow her on Twitter at @AnuSanghvi.
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3 comments
shirley009
shirley009

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Nicholas
Nicholas

It will be VERY interesting to see what happens in the near distant future with small business and the affordable care act...

Likhon
Likhon

I think it's a useful information for small business.thanks

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