One of the most prevailing misconceptions about the Affordable Care Act (i.e., "Obamacare") is that it doesn't really impact "small" businesses. While it is true that the dominant provisions of the Affordable Care Act (particularly, the Employer Mandate) apply only to "large" employers with more than 50 employees, there are still several provisions that affect all employers, including small businesses with 50 employees or fewer.
Earlier this week, I discussed some of the requirements that Obamacare places on small businesse; however, when advising clients as an Obamacare attorney, I find that it's also important to make them aware of the various ways that the Affordable Act can help their small business reduce their healthcare expenses.
Here is a summary of four incentives Obamacare creates for small businesses:
1. Small Business Health Options Program
Small businesses can access the health care insurance marketplaces through the Small Business Health Options Program (SHOP). SHOP provides small businesses (which, prior to the implementation of the ACA, paid, on average, 18 percent more for health insurance than larger businesses) the opportunity to pool their risks together in order to have access to more insurers, greater options and lower costs.
In order to be eligible to participate in SHOP:
- A small business must offer coverage to all of its full-time employees (employees who work 30 hours per week or more);
- Seventy percent of those full-time employees must actually enroll in the plan; and
- the small business must have an office or worksite within the geographical service area of a particular SHOP
2. Small Business Health Care Tax Credits
The Small Business Health Care Tax Credit provides a tax credit to small businesses with fewer than 25 full-time employees of up to 50 percent of the amount the employer paid toward insuring their employees.
In order to be eligible for the credit:
- A small business must pay for at least 50 percent of the cost of single (not family) health care coverage for each full-time employee;
- those employees must earn, on average, less than $50,000 a year (adjusted for inflation); and
- the insurance must have been bought through SHOP.
The IRS has created a Small Business Health Care Credit Estimator to help small businesses determine whether they are eligible for the credit and, if so, the amount of the credit.
3. Workplace Wellness Programs
One of the central goals of Obamacare is to lower healthcare costs in the long-term by incentivizing healthy behavior in the short-term. One of the ways it does that is through the promotion of wellness programs and encouraging companies to focus more on creating a healthier workplace. Wellness programs incentivize healthy behavior by offering rewards for individuals who meet a goal related to their health (for example, lowering cholesterol). The maximum reward allowed is 30 percent of the cost of health coverage (or 50 percent if the program's goal was related to the prevention of tobacco use).
4. Medical Loss Ratio Rebates
Another goal of Obamacare is to ensure that insurance companies are spending their money on medical care, not administrative costs. The ACA therefore provides that any insurance company that spends less more than 20 percent of premium dollars on administrative costs is required to provide rebates to their policyholders (which, in most cases, will be the employer who sponsors the plan).
So small business owners, after making sure that you're doing everything you need to do for Obamacare, make sure that you're also aware of everything that Obamacare can do for you.