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 which requires employers to offer adequate coverage to their employees or be liable for certain tax penalties -- apply only to so-called "medium" and "large" employers (employers with more than 50 and 100 employees, respectively), there are still several provisions that affect all employers, including small businesses with 50 employees or fewer.
Here is a summary of 4 obligations placed on small employers by Obamacare:
1. Notice to Employees
Almost all employers were required to provide a notice to their employees by October 1 of last year, which informed their employees of the following:
- that the new Health Insurance Marketplace exists
- that they may be eligible for a tax credit if they buy coverage through the Marketplace
- that they may forfeit their employer contribution towards health coverage if they buy coverage through the Marketplace
2. Summary of Benefits and Coverage (SBCs) Disclosure
Employers are required to provide employees with a standard Summary of Benefits and Coverage designed to explain to employees what the plan covers and what it costs. This should enable employees to gain a better understanding and properly assess what their various options are for buying health coverage. A complete FAQ from the Department of Labor regarding SBC disclosure can be found here:
3. Additional Medicare Withholding on Wages
The employee portion of the Medicare Part A Hospital Insurance (HI) tax has increased from 1.45% to 2.35% on employees earning over $200,000 (single filers) and $250,000 (married filing jointly). While the tax increase is only on employees (the employer portion remains at 1.45%), employers have a withholding obligation.
4. Waiting Periods
Under Obamacare, group health plans may not impose a waiting period that is greater than 90 days from the date upon which the employee becomes eligible for health coverage under the plan. This applies to all employer-sponsored plans, regardless of size.
There are other requirements that apply to employers with self-insured health plans, which could, in theory, apply to small businesses but given that most small businesses that provide health insurance do so through fully-insured plans, these are unlikely to apply in most circumstances. Later this week, we will discuss some of the opportunities and incentives the Affordable Care Act provides to small businesses.