There is no question that The Affordable Care Act will affect small businesses, and business owners need to be familiar with the overall impact of Obamacare on their bottom line. From changes to the business health insurance system to required employee education and possible tax breaks, Obamacare is complex and will effect all types of businesses. If you own a small business, here are some primary considerations to take into account as you navigate this new era of healthcare offerings.
Changes to the Health Insurance System
There has been an increase in the employee portion of Medicare. The Medicare Part A Hospital Insurance has increased to 2.35% for employees who file single and earn $200,000 and up to $250,000 for those filing married jointly. Employers have an obligation to withhold, even though the tax increase only applies to employees.
Under small business Obamacare, all group health plans must follow a close waiting period rule. None may impose any waiting period longer than 90 days beginning from the date that the employee is eligible for the coverage of the plan. This rule applies to every employer-sponsored plan, no matter the size.
Nearly every employer is required to educate their employees about the Affordable Healthcare Act. Each employee was to receive information on Obamacare by October 1, 2013. Businesses must disclose the following as part of this required education:
- A new Health Insurance Marketplace is in place.
- Individuals might receive tax credits for health insurance purchased through the marketplace.
- An employee can choose to forfeit the employer contribution to health care coverage by buying through the Marketplace.
- Businesses are also responsible for disclosing the summary of coverage and benefits.
The education must be reviewed, and employees in some companies are able to ask questions in meetings or in other forms. Overall, while this education is useful for employees, the review process and paperwork required to provide employee education tools can affect small business management efficiencies.
Health Care Tax Credits for Small Business
The official Small Business Health Options Program (SHOP), offers employers a tax credit if the business has fewer than 25 employees at a full-time status. The credit can be up to 50% of the employer-paid amount toward employee insurance.
- The business must meet outlined criteria to qualify for credits:
- The small business must be able to pay 50% of the cost of single health care coverage. for every employee who works full-time.
- The full-time employees must be earning less than $50,000 per year on average.
- The insurance in question must be purchased through the Marketplace.
Medical Loss Ratio Rebates
Obamacare strives to ensure that all insurance companies use funds for medical care instead of on administrative costs. Any insurance company spending more than 20% of funds on administrative costs must provide rebates to all policyholders, which is typically the employer sponsoring the plan.
Small businesses are impacted by these rebates, receiving money back if the insurance company is not using funds according to Obamacare. Since most insurance companies don't want to pay a penalty, they will rearrange their systems to reallocate funds. These system changes take time, and in the meantime, small businesses will will gain some incentives from this rebate policy.
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