Software issues, debate over young invincibles, delays, extensions, sticker shock are just a few of the myriad issues surrounding Obamacare. Ideally, Obamacare has been seen as a harbinger of major change in the way individuals purchase health insurance. However, Obamacare has something to offer to small businesses too. While small business have until October 2016 to confirm their health insurance plans to new federal rules, the below are a few things that small businesses should keep in mind.
Although most of the major Obamacare provisions apply to large organizations, with 50 or more employees, several incentives are in place for small businesses with 50 or lesser employees. Here, we round up four incentives Obamacare has in store for small businesses.
• SHOP (Small business Health Options Program) Exchanges: These exchanges were built specifically for the needs of small businesses. Traditionally, small businesses have had problems getting attention from any major health insurance companies offering better plans, incentives and more. With SHOP exchanges, Obamacare provides small businesses with a chance to pool their buying power and hopefully reduce the prevailing gap of 18 percent higher insurance premiums than larger firms.
• Health Care Tax Credits: Another incentive for small businesses – tax credits. Up to 50 percent of the amount paid by a small business toward employee health insurance is given back as tax credits. In order to be eligible for the tax credit, employers need to follow the below guidelines.
a. The business must be paying at least 50 percent of the health insurance cost of the individual employee. The costs of employees’ family health insurance premiums don’t apply.
b. Employees earning less than $50,000/yearly are eligible.
c. Insurance plans must have been purchased on SHOP exchanges
• Medical Loss Ratio Rebates – A core aspect of Obamacare is ensuring health insurance companies are spending their money on medical costs, not administration. According to the ACA mandate, any insurance company utilizing more than 20 percent of premium toward administrative costs is required to provide rebates to policyholders. Effectively, small businesses are eligible for these rebates, which further reduce their overall health insurance premium liability.
• Wellness Programs at Workplace – Obamacare follows the philosophy of making health insurance affordable by reducing the risk of health ailments across workplaces. One of its endeavors on this front is the Workplace Wellness Program, which encourages small businesses to provide a healthier workplace through incentives. These incentives are based on individual health performance, and trickle down to owners of small businesses in terms of up to 30 percent of the cost of health coverage, and 50 percent if the the health performance goal was related to tobacco use.
By taking advantage of these incentives, small businesses can reduce their health insurance liability by a significant amount. Other than meeting the above targets, there are some additional requirements placed on small businesses to qualifying for these incentives. A quick roundup of these requirements is presented here for quick reference.
• Small businesses were required to send a notice to all the employees by October 1, 2013 informing them about SHOP exchanges and the associated tax benefits employees might obtain by purchasing health insurance through these marketplaces.
• A Summary of Benefits and Coverage needs to be sent out to employees listing the health plans, their coverage, and their costs. This will help employees choose the right health plan for themselves through better understanding of the changes.
• Employers are required to exercise Medicare withholding on wages in lieu of the increase in Medicare Part A Hospital Insurance tax from 1.45 percent to 2.35 percent.
• Abolition of waiting periods more than 90 days from eligibility of employees for health coverage under health plans. The max waiting period can be 90 days.
When the SHOP exchanges, after their much-publicized delay, go live on October 1, 2014, most small business owners will want to take advantage of the incentives. Now is the time to meet the prerequisites set by the law and be ready for October 1.