Employer provided health insurance has always taken precedence for many employees considering a new job. While large employers have always enjoyed the attention of major health plans and could put together better benefit packages, small businesses have generally received the short end of the stick. However with Obamacare, the administration wanted to change the way employees of these small businesses get insurance, and in came the concept of SHOP (Small business Health Options Program) exchanges.
SHOP exchanges are designed to give employers with fewer than 50 employees a chance to obtain better healthcare options for their employees. These exchanges work in the same way as the individual marketplaces – they just focus on the small business market. For instance, small employers who paid at least 50 percent of the health insurance cost of their employee will be eligible for 50 percent tax credits on the amount paid. The SHOP exchanges also provide up to 30 percent rebate on healthcare costs if they set up a wellness program, which encourages employees to become healthier.
Just like the incentives, there are some mandates applicable on small businesses that want to benefit from shopping on SHOP exchanges. It’s more of a notice to employees, mandate information, etc. thing, nothing that small businesses cannot complete. However, that’s not where the requirements end. In order to ensure a level playing field for everyone, the Obamacare rules require that the business be under 50 employees. This can happen through certain transactions. These business transactions can change the way Obamacare mandates view small businesses. Let’s take a look at three transactions that can surprisingly change the way your business is viewed by the administration.
1) Working Hours – while the calculation of regular employees for small businesses might seem to be limited to the number of full time employees working in the organization, that’s not the case. You also need to count the number of working hours of part time employees for estimating the full time equivalents for a small business. In the case where combined full time hour equivalent cross those of a 50 employee company, the small business would not be considered a small business anymore, and would come within the purview of the employer mandate and other associated requirements.
2) Controlled Group Ownership – The estimation of total number of employees is also dependent on the possession of ownership of the organization. In the case where a single owner has two companies, both of which are small businesses, the nature of business needs to be considered. When both of the businesses are unrelated and are not a part of a ‘controlled group,’ the businesses are considered separate and their workforces are not combined. However, if according to the employer mandate and the tax code, those two businesses are part of one controlled group, the calculation of the size of the business requires the owner to take both the organizations into account. Generally, this can break the 50-employee threshold. Therefore, if you are looking to acquire another related business or already have another related business, you would have to consider this aspect of the Affordable Care Act.
3) Successor Liability – Just like the above case, if you are buying a new company that was in the purview of the small business or employer mandates earlier but did not meet the guidelines, as a successor, you would be liable to all the penalties and liabilities of the previous company. Therefore, while buying a new business, it would be crucial to evaluate the business from the perspective of Affordable Care Act and associated penalties.
As October 1, 2014 edges closer, small businesses have started gearing up for the multitude of changes and opportunities opening up for them in health insurance. If you are a small business, preparing for the mandate, meeting its requirements, and keeping the above transactions in mind can help you get ready for the benefits SHOP exchanges will be offering. So, are you ready with your personal SHOP plan?