The Affordable Care Act Positions Small and Medium Sized Businesses on the Frontline of Change
The Supreme Court’s ruling on the Affordable Care Act (ACA), which passed by a 5-4 vote last week, has business owners seeking an elusive guide to the potential credits, taxes and penalties.
Perhaps one of the most drastic changes to employer-based insurance is the employer mandate. Beginning in 2014, an employer with more than 50 full-time workers will have to offer full-time employees a minimum level of coverage or pay a penalty. While the law does not “force” these businesses to provide insurance, a $2,000 per employee penalty will be assessed by the IRS for non-compliance. Although a larger price tag may be associated with insuring employees rather than paying the penalty, eliminating or refusing to implement a health insurance plan may cause the company to lose a competitive edge as an employer.
Employers will not be required to provide coverage for part-time employees, however these employees may be counted as partial employees for the purpose of determining whether an employer has 50 or fewer employees.
If an employer insurance plan is deemed unaffordable, thus causing employees to purchase insurance through the state-based exchange, the employer must pay a separate fee.
This provision goes live in 2014 upon the creation of state-based exchanges.
All companies with 50 or more employees must now report the total cost of the group’s healthcare plan to the IRS on employer W-2 forms.
In 2011, a year after the ACA passed through Congress, federal tax credits became available to small businesses offering health insurance with a workforce of less than 26 employees whose average annual salary was less than $50,000. This assistance is planned to increase from 35% presently to 50% for qualifying companies in 2014.
The ruling also keeps the provisions that have previously gone into effect. All employer healthcare plans must continue to:
– cover children up to and including age 26
– cover preventative care services at 100% with no cost sharing
– refrain from imposing pre-existing conditions on enrollees
under age 19
– provide essential health benefits without annual or lifetime
In addition, plans must prepare to limit flexible spending account reimbursements to $2,500 beginning in 2013.
Employers with more than 200 workers will be required, in 2014, to automatically enroll employees in health insurance plans unless they opt out.
The Supreme Courts ruling on the ACA marks the beginning of sweeping changes for small businesses and their employees around the nation.