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The Affordable Care Act: 3 Things Your Small Business Needs to Know

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act, which enacted comprehensive healthcare reform into law. Although the law makes sweeping changes to expand coverage, increase benefits and lower costs, and reform both our public and private health insurance systems, this blog post will focus on the Affordable Care Act’s effects on small businesses.


1. When does the Affordable Care Act go into effect?

Several of the provisions of the Affordable Care Act went into effect immediately upon being signed into law, while others are being phased in over time. Several of the most significant reforms, including the Medicaid expansion, insurance exchanges, and minimum coverage provisions (the “individual mandate”) will go into effect beginning in 2014. On July 2, 2013, the Obama administration announced that it was delaying until 2015 the requirement that businesses with more than 50 employees provide health insurance to employees, which was originally to go into effect on January 1, 2014. The delay was in response to numerous complaints from businesses that the requirements were too complicated to implement in time.

2. How Does the Affordable Care Act Affect Small Businesses?

Beginning in 2015, employers with 50 or more full-time employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit (i.e., a low income employee who purchases coverage on his own and receives a tax credit) will be assessed a fee of $2000 per full-time employee, excluding the first thirty employees from the assessment. Businesses with less than 50 full-time employees are exempt from this requirement.

According to Mark Schwartz, principal of Schwartz & Associates, LLC, an independent insurance broker in New York City, a potential trap for small businesses lies in the change in the definition of who constitutes a full-time employee. The new guidelines now define a full-time employee as anyone who works 30 hours or more per week. The law previously considered someone full-time only if they worked 40 hours or more per week. Thus, many businesses that would not have previously been considered to have 50 or more full-time employees may now fall within the purview of the Affordable Care Act and must offer their employees coverage or they will be assessed fees.

3. How Does the Affordable Care Act Provide Premium Subsidies to Employers?

Small businesses with no more than 25 employees and average annual wages of less than $50,000 that purchase health insurance for their employees may be eligible for tax credits. Beginning in 2014, small businesses that purchase coverage through the state-based exchanges established under the Act will receive a tax credit of up to 50% of their contribution towards an employee’s health insurance coverage, provided the employer is paying at least 50% of the total premium. A full credit will be available for businesses with 10 or fewer employees with average annual wages less than $25,000.

The Affordable Care Act is an extremely complicated statute that will impose many new obligations on small business owners. It is essential that these businesses consult with an experienced insurance broker or consultant to ensure their compliance with this new law.

Frank Monteleone

Frank J. Monteleone

Monteleone Law
11 Broadway, Suite 615
New York, NY 10004
www.monteleonelaw.com
fjm@monteleonelaw.com

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