Change is a-coming on the health care front. Obamacare is making sure of that. Otherwise known as the Patient Protection and Affordable Care Act, this 2400-page bill, passed into law in 2010, is confusing and worrying an awful lot of small business owners.
What Does it Mean for Business ?
The Act originally stipulated that every American citizen must have health insurance as of January 1, 2014; the date has since been pushed forward to the beginning of 2015. The impact for business? The bill also requires employers to make quality, affordable health insurance available to their full time workers. This simple task sounds like it carries the potential for a huge – and perhaps expensive – hassle. But a closer look at the details of the bill will give a clearer perspective on the situation.
How Small is Small Business and What is Full Time?
Small businesses are exempt from the requirement to provide health insurance, but must inform their workers about the Act. According to the PPACA, a small business is one that employs fewer than 50 people full time. Should an enterprise of this size voluntarily opt for employee health insurance, it must comply with the new law. Employers of more than 50 workers are subject to fines if they fail to come through. For the purpose of the PPACA, a full time employee is defined as working at least 30 hours weekly or 130 hours monthly, on average.
Are You Exempt?
At this point, you may be breathing a sigh of relief if you calculate that you have fewer than 50 full time employees. Not so fast. If your business is seasonal – say a tourist gift shop or a ski resort – the folks in your employ can be assessed as FTE (full time equivalent employees). FTEs, who average 120 hours of work in a month, or work for a period longer than 4 months, are also eligible for the health care provision.
Confused yet? There’s more. Less-than-50-employee enterprises with a common owner may be grouped together for purposes of this law.
What’s in Store?
Marketplaces for health insurance, called “exchanges,” are part of the plan, to be run by individual states. These will include Small Business Health Options Program exchanges for firms with fewer than 100 employees. SHOP, as it is dubbed, will facilitate small businesses cooperating to increase their joint health insurance purchasing power. However, it’s up to the states to decide whether to limit SHOP eligibility to businesses with <50 employees rather than <100.
The good news is that once an enterprise is part of SHOP, it may continue to participate even if the number of its employees increases to over 100. More good news: a small business tax credit is available for two years to cover 50% of the cost of health insurance premiums on plans purchased through SHOP. Even more good news: PPACA will make affordable health insurance more available to small business owners themselves. Eighty-three percent of entrepreneurs who presently have no coverage whatsoever will become eligible for health insurance under the provisions of the Act.
Despite the appeal of purchasing insurance via the Small Business Health Options Program, it pays to shop around. Self-insurance may turn out to be a better choice in terms of price and/or benefits.
The Bottom Line
Looking at the facts regarding its impact on small business, it seems that Obamacare, far from being a bogey bill, may actually be of benefit to employers as well as employees. As Richard Lorenzen wrote in Forbes recently, “The Affordable Care Act … enables us to provide a better life for those who help make our success possible everyday.”
For detailed information on the provisions of the PPACA, see the US Department of Labor’s Affordable Care Act Regulations and Guidance.