How Will The Health Care Bill Affect Your Business?

Health care reform legislation signed into law by President Obama has generated lots of questions from business owners about what the new law will mean to them.

“Even those people most involved in the debate have questions about how the bill will affect their businesses,” said Drew Gruenburg, chief operating officer of the Society of American Florists (SAF). “They wonder if premiums will go up or down. Who’s covered and who’s not? When does it all take effect? How will this affect their employees…family…customers? There are just so many unknowns at this point as the final regulations are being written.”

To answer some of these questions and help make sense of the law’s impact on employers, SAF details the provisions most likely to affect small businesses and when those changes will start to occur.

Employer Requirements

Effective: Jan. 1, 2014: In the strictest sense, the law does not force employers to offer health insurance. It does, however, assess a fee on certain employers of 50 or more employees under certain conditions.

Employers with fewer than 50 employees are exempt from the penalties described below.

Employers of 50 or more full-time equivalent employees who do not offer health insurance that have at least one full-time employee who gets subsidized health insurance through the exchange, will have to pay a fee of $2,000 per employee, excluding the first 30 employees. A full-time equivalent employee is one who works 30 or more hours a week.

Employers of 50 or more who offer health insurance and have at least one full-time employee who gets subsidized health insurance through the exchange will be required to pay the lesser of $3,000 for each employee receiving a tax credit or $2,000 for each full-time employee.

Employers with more than 200 employees are required to automatically enroll employees into health insurance plans offered. Employees may opt out of the coverage.

Tax Credits for Employers

Phase I (taxable years 2010, 2011, 2012 and 2013): If employers of no more than 25 full-time equivalent employees want to offer health insurance or already do — and if their employees have annual full-time equivalent wages that average no more than $50,000 — they are eligible for a tax credit. The tax credit is up to 35 percent of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50 percent of the total premium cost. The full credit is available to employers with 10 or fewer full-time equivalent employees and average annual full-time equivalent wages of less than $25,000. The credit phases out as firm size and average wages increase.

Phase II (taxable years 2014 and beyond): If small employers purchase coverage through a state exchange, a tax credit is available for up to 50 percent of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50 percent of the total premium cost. The credit is available for two consecutive taxable years. The full credit is available to employers with 10 or fewer full-time equivalent employees and average annual wages of less than $25,000. The credit phases out as firm size and average wages increase.

Tax-exempt small businesses meeting the requirements outlined above are eligible for tax credits of up to 35 percent of the employer’s contributions toward the employee’s health insurance premium.

Wellness/Reward Programs

Effective Jan. 1, 2014: The law provides grants for up to five years to small employers that establish wellness programs. Funds will be appropriated beginning in fiscal year 2011.

The law also permits employers to offer employee rewards — such as premium discounts and waivers of cost-sharing requirements among others – of up to 30 percent of coverage for participating in a wellness program and meeting certain health-related standards.

Health Insurance Exchanges

Effective: Jan. 1, 2014: The law creates the state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) exchanges, marketplaces where individuals and small businesses with up to 100 employees can purchase coverage. The law restricts access to coverage through the exchanges to U.S. citizens and legal immigrants who are not incarcerated.

The law creates four benefit categories of plans plus a separate catastrophic plan. Health insurance plans participating in the exchange must meet certain requirements in marketing, customer service, provider networks and transparency. States have option to create a basic health plan for uninsured individuals with incomes between 133 and 200 percent of the federal poverty level. (The federal poverty level for individuals in 2009 is $10,830, and for a family of three is $18,310.) Businesses with more than 100 employees can begin purchasing coverage in the SHOP exchange in 2017.

Other Provisions

Individual Mandate: The law requires U.S. citizens and legal residents to have health insurance or pay a penalty.

Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants and incarcerated individuals.

The penalties for not having insurance will be phased-in according to the following schedule. The penalties are the greater of:

$95 or 1 percent of taxable income in 2014
$325 or 2 percent of taxable income in 2015
$695 or 2.5 percent of taxable income in 2016

After 2016 the penalty will be increased annually by the cost-of-living adjustment

Tax Changes: There are a variety of tax increases to pay for the new regulations. It is best to see your tax attorney or health insurance expert for details, but those dealing with Medicare and health insurance plans may of specific interest to you.

Medicare Part A: The law increases the Medicare Part A tax rate on wages by 0.9 percent (from 1.45 percent to 2.35 percent) on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly and imposes a 3.8 percent tax on unearned (investment) income for higher income taxpayers. The effective date is Jan. 1, 2013.

High cost insurance plans: The tax is on insurers of employer-sponsored health plans that cost more than $10,200 for individual coverage and $27,500 for family coverage. These costs will be indexed to the consumer price index beginning in 2020. The tax is equal to 40 percent of the cost of the plan that exceeds the threshold amounts. The tax is imposed on the issuer of the health insurance policy. In the case of a self-insured plan this is the plan administrator or in some cases the employer. The effective date is Jan. 2018.

Health Insurers: Several changes relate directly to health insurers, including the following:

Effective September 2010: Uninsured dependent children can be covered under a parents’ health insurance plan.

Effective now: Insurance companies cannot set lifetime limits on the dollar value of heath care coverage.

Pre-existing conditions: Effective September 2010 for children and in 2014 for adults, insurance companies can no longer deny coverage for pre-existing conditions.

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