The Healthcare and Education Reconciliation Bill was signed into law on March 30, 2010 by President Obama. Whatever you may believe about the merits and pitfalls of this bill, one thing is certain…it’s been passed and we need to deal with it from a business standpoint.
In this post, I’m going to provide you with a brief overview of how the healthcare bill is going to affect your business. The plan is being phased in over several years with many of the more significant aspects coming into effect in 2014. Small businesses and self-employed individuals will be impacted immediately starting in the 2010 taxation year.
Small Business Tax Credits
Small businesses that employ 25 workers or less with each employee earning annual wages of less than $50,000 will be entitled to a tax credit if they purchase health insurance for them. The Tax credits work as follows:
Phase I – Tax Years 2010 to 2013
• A small business owner that contributes at least 50% of the total or benchmark health insurance premium for each employee will receive up to a 35% tax credit.
• For those employers that have 10 or fewer workers with annual wages under $25,000, you will be able to claim up to a 100% tax credit.
• Small businesses that are tax-exempt and meet the above requirements can receive a tax credit of up to 25% of the employer-paid health insurance premium.
Phase II – Tax Years 2014 and Forward
By 2014, the State Exchanges are to be in place. They are also known as ‘SHOP Exchanges’ or ‘Small Business Health Option Programs’. SHOP Exchanges offer small businesses the opportunity to pool their resources in order to purchase health insurance for their employees.
• Eligible employers that purchase health insurance coverage for their employees through state exchanges will be entitled to up to a 50% tax credit from years 2014 to 2016.
• For those employers that have 10 or fewer workers with annual wages under $25,000, you will be able to claim up to a 100% tax credit.
• Small businesses that are tax-exempt and meet the above requirements can receive a tax credit of up to 25% of the employer-paid health insurance premium.
Reinsurance for Older Workers
As of July 2010, retirees over 55 years of age who are not eligible for Medicare will be eligible for a temporary reinsurance program by their employer. The reinsurance program reimburses owners and insurers for up to 80% of retiree claims between $15,000 and $90,000.
Other Small Business Issues Regarding Healthcare
As of January 1, 2014 the following will apply according to the information we currently have:
• Penalties for employers of firms with more than 50 employees that do not provide health coverage will be as high as $750 per eligible worker.
• Small businesses that impose a waiting-period before a new employee can receive health coverage can be fined $400 to $600 depending on the length of the delay.
• Businesses that employ more than 200 workers must enroll their employees into employer-sponsored health insurance plans although employees may opt out.
This is just a quick overview to let you know what to expect in regards to healthcare issues for small business. As more information becomes available, I’ll be sure to keep you informed.
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