How Health Reform Will Affect Small Business

In Wisconsin, small businesses make up about 76 percent of all businesses.  Starting this year, 84,395 small businesses in our state will be eligible for tax credits based on the percentage of their contribution to their employees’ health insurance.  I have heard from many businesses, large and small, concerned about how they will be affected under the new law.  I want to take the time to explain what will change for employers and employees.

How do small businesses qualify for tax credits?

To be eligible for the tax credit, the employer must contribute at least 50 percent of the total premium cost.

Since this bill was signed into law, many small businesses are now eligible for tax credits of up to 35 percent of the premiums they pay towards their employees’ health insurance for years 2010-2014. 

The full credit of 35 percent of premiums will be available to businesses with 10 or fewer employees, which have average annual wages of $25,000 or less.

Credits are phased out when a business reaches 25 employees and average annual wages of $50,000. 

Once the exchange is up and running in 2014, tax credits will be available for two additional years.  In those years, the credit will be available for up to 50 percent of the premiums paid.

For more information on the Health Care Small Business Tax Credit, click here.

What are the small business insurance exchanges and how do they work?

In 2014, a health insurance exchange will be made available exclusively for small businesses, with up to 100 employees.  Employers and their employees will be able to choose from a range of health plans in the Small Business Options Program (SHOP).  This exchange will function just as the Exchange in the individual and small group market will works.  These Exchanges will begin in 2017, and will have web portals that provide standardized, easy-to-understand information to make comparing and purchasing health care coverage easier for small business employees and reduce administrative costs.

What are the penalties for not offering health insurance?

The new law requires all employers with more than 50 employees to provide their full-time employees with health insurance.  In 2014, if employers with more than 50 employees do not offer insurance, they will be charged a penalty.  The penalty will be $2000 for each full-time employee, but the employer will not be penalized for the first 30 full-time employees and part-time employees will not count toward the penalty.  

Employers will be allowed to impose a 90-day waiting period before health benefits are provided.

A full-time employee is defined as an employee who is employed on average at least 30 hours per week.

However, 96 percent of all firms in the United States (or 5.8 million out of 6 million total firms) are exempted from paying the penalty.

If you own a small business, and want to see how you will benefit from tax credits, click here.