Businesses with fewer than 50 full-time employees are not required to provide health insurance for their employees under Obamacare. 95% of businesses in this size-range already provide health insurance for their employees, but the cost is usually high and coverage is often slim.
I recently participated in a webinar offered by the Small Business Majority, a non-profit group that supports Obamacare, and the Small Business Administration, a federal agency. The webinar provided some good information on how Obamacare and the SHOP (Small Business Health Options Program) will work, starting on October 1st.
Currently, small businesses pay about 18% higher health insurance premiums than large companies. This is because the insurance risk is spread only among the employees in that company. As a result, small companies with female employees, older employees, or employees with a chronic illness pay higher premiums. This will change under Obamacare because the employer group will be part of a large, state-wide group.
To keep premiums down, many employers have been forced to choose lousy health insurance plans with high deductibles and co-pays. Before Obamacare, some companies even offered plans with very limited coverage caps such as $100,000. A recent Time Magazine article told stories of employees who thought they had decent coverage, only to find their “life-time limit” for their insurance policy ran out when they got seriously ill. This will never happen under Obamacare.
Since 2010, 360,000 small businesses have taken advantage of tax credits for providing health insurance. The tax credits total 35% of what the employer paid towards their employees’ health insurance costs. The tax credit goes up to 50% in 2014.
COMPANIES WITH 24 OR FEWER EMPLOYEES
The business owner, his partners and family members are not included in the employee number. This is important because the employer might make a lot more money than his employees – and he might pay his wife and kids more than he pays his non-family employees.
Full Time Equivalent (FTE): 40 hours is considered full-time. Two employees who each work 20 hours are considered 1 FTE.
To receive the tax credit the employer must pay 50% of the of his employees’ health insurance premiums.
Employee salaries must average less than $50,000 per year.
COMPANIES WITH FEWER THAN 10 EMPLOYEES
Employee salaries must average less than $25,000 per year.
SHOP: Small Business Health Options Program
To get tax credits, employees must enroll through the SHOP.
Insurance agents/brokers can help employees enroll through the SHOP.
In 2015, the SHOP will be expanded to provide employees with more than one choice for health insurance. When this happens, employees who work for small companies will have several plans on a “menu”, just like federal employees now have. (Well, they won’t have as many choices as the feds have, but they will have more choice than they do now or will have in 2014.)
COMPANIES WITH 50 OR MORE EMPLOYEES
These companies are required to provide health insurance to their employees, but not until 2015.
TALK TO AN INSURANCE AGENT/BROKER WHO IS TRAINED ON THE SHOP.
Some of the benefits for small businesses are pretty clear to me. But the devil is in the details, so insurance agents and brokers will be trained to provide the full picture to employers. I’m not involved with small business group insurance, but it looks to me like a great opportunity for those agents/brokers who already work in this market. I’m sure insurance companies already in this market have a plan for educating their current clients and getting new ones.
NO MANDATE FOR SMALL BUSINESSES
If small businesses do not offer health insurance, their employees can go to the state health insurance exchange (as of October 1st) to enroll in a plan. Those who make less than $45,960 as a single person, or $62,040 as a couple, or $78,120 as a couple with one child, will get help with their premiums. (See the income chart in a recent post.)
Obamacare has been painted as a job-killer for small businesses. It doesn’t look like that way for the smallest companies and their employees (from what I have learned). I’m looking forward to seeing how it works out for the millions of people who have jobs without health insurance, or those who have had lousy, expensive health insurance.
There is a website that answers questions about health insurance options for small businesses. You can find it here: http://business.usa.gov/healthcare
Here is a link to the IRS web page that addresses how to count FTEs, average wages, and tax credits: http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-Questions-and-Answers:-Determining-FTEs-and-Average-Annual-Wages