Do the words “health reform” and “employer mandate” frighten you? If they do, you’re not alone. But what does health reform really mean for the self-employed today, and what will it mean for your bottom-line?
Many small business owners are confused about their responsibilities under the Affordable Care Act. A recent survey of small businesses conducted by eHealthInsurance found that a third (33.6%) believed they would be required to provide health insurance for their employees, and another third (35%) weren’t sure. A similar number of respondents believed they may face tax penalties for not providing group health insurance coverage.
YOU PROBABLY WON’T HAVE TO PROVIDE HEALTH INSURANCE TO YOUR EMPLOYEES.
In fact, of the more than 400 small business owners surveyed by eHealthInsurance, only two would be required by the health reform law to provide coverage to employees in 2014, or face a tax penalty for not doing so.
Three Things Small Businesses Should Know about Health Reform
Small business owners may not agree with certain provisions of the Affordable Care Act, but many will find the requirements of the law less burdensome than they fear. Some may even find that health reform provides them with new tools, resources, and a higher degree of flexibility when it comes to hiring and retaining the best workers.
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There are three key things that small business owners today should know about health reform:
- You probably don’t have to provide health insurance to your employees
- If you do provide health insurance for employees, you may qualify for special tax breaks
- If you can’t afford to provide health insurance, your workers need not go uninsured
Let’s look at each of these in more in detail.
Most Small Businesses Not Required to Provide Health Insurance
Starting last January, businesses with fifty or more full-time workers (or the equivalent in part-time workers) will be required to provide health insurance for their employees. This is the so-called “employer mandate.”
Employers who meet this criterion and do not provide coverage for workers will face tax penalties that are triggered when employees turn to a state health insurance exchange to purchase coverage on their own. Companies that provide employees with especially rich health insurance benefits (“Cadillac plans”) will be required to pay an extra tax.
However, the vast majority of small businesses today have substantially fewer than 50 full-time workers and will be exempt from the employer mandate when it comes into effect. Like today, they will be free to provide health insurance to workers or not. And they will not face any tax penalties for not providing coverage.
Tax Breaks for Small Businesses Providing Coverage
Small businesses that do opt to provide health insurance may be eligible for special tax deductions. If you’re a business owner with no more than 25 employees and the average annual wages you pay them are less than $50,000, you may be able to deduct up to 50% of the amount you contribute towards employees’ monthly premiums. Talk to your accountant to learn more.
Also this year, owners of small and mid-sized business (with 100 or fewer workers) will be able to turn to government-sponsored online health insurance exchanges where they can get quotes from competing health insurance companies and enroll in the plan that best meets their needs and budget.
Help for Workers without Employer-based Coverage
We all know that health insurance just isn’t affordable for some small business owners. And while the increasing cost of employer-based coverage has slowed in recent years (it went up a relatively modest 7% in 2012, according to the Kaiser Family Foundation), it’s not likely to start going down anytime soon.
The good news is that small business owners who find they still can’t afford a group health plan won’t have to worry about their workers going uninsured – with all the risks to personal health and company productivity that might entail. Employees can now buy their own insurance at Healthcare.gov.