With the recently enacted federal healthcare law, businesses can expect significant changes in the health insurance landscape. What those changes will be and how they will play out on Main Street is not at all clear and will take time to be understood. Businesses of all sizes across America are wondering what it really means to them and their employees.
A recent article in USA Today by Rhonda Abrams, president of The Planning Shop (publisher of books for entrepreneurs), gave an overview of the effects of the health care reform legislation on small businesses (“The Good and Bad in Health Care Reform for Small Businesses” March 26, 2010) from her perspective.
According to Ms. Abrams, one good thing for small businesses are the tax credits starting with 2010 taxes. Small businesses with 25 or fewer full-time equivalent employees that pay at least 50% of the health care premiums for their employees are to qualify for a tax credit up to 35% of their premiums. The tax credit is to increase to 50% in 2014 if the business purchases insurance through the Small Business Health Options Programs, or “SHOP” exchanges. The amount of the tax credit is dependent upon the number of employees and their average wages. Ms. Abrams points out that the tax credit is NOT available to sole proprietors and that might cause business owners to consider changes in their corporate form.
According to Abrams, the SHOP exchanges are to start in 2014. These exchanges would allow businesses with less than 100 employees to pool their risk and, hopefully, receive lower premiums than if buying on their own.
The USA Today article goes on to note that self-employed persons are to qualify for a subsidy starting in 2014 to help purchase health care. Individuals earning up to 400% of the poverty level would qualify for assistance. At today’s poverty level, this means a family of four would qualify up to $88,200.
The downsides to the health care reform legislation, Abrams says, include no caps on health insurance premiums. She predicts that health insurance companies will increase their premiums in the next few years as they look toward increased competition in 2014 due to the exchanges. For those businesses with more than 50 employees, they must provide health insurance coverage for their employees or pay a fine starting in 2014. Also, starting in 2013 the new law places new taxes on small business owners including increased Medicare tax rates and an additional tax on capital gains, dividends and interest income.
While the health care debate is not over and the devil is in the details of how the new law is actually implemented, changes are scheduled to start soon that could affect virtually every business, large or small. Take time to consult with your accountant or attorney so you can fully understand the new tax and legal implications of the health-care reform law for your small business.
For more information, articles, training and online tools, visit Arvest's Small Business Resource Center.