What Does the Affordable Care Act Mean for Small Businesses?

The recent health care reform initiatives have many people asking “do small businesses have to offer health insurance?”

This legislation requires that all individuals have health insurance to avoid paying a penalty, and people can now get individual coverage through the government’s online Health Insurance Marketplace. So what does the Affordable Care Act mean for small businesses? Well, first of all, it’s important to understand what determines if a business is small or large.

A small business has up to 99 employees while a large business has 100 or more. As part of the Employer Mandate section of the Affordable Care Act (ACA), businesses with 50 or more full-time equivalent (FTE) employees must insure 95 percent of them by 2016 (businesses with fewer than 50 full-time workers are exempt from this requirement). Firms with 100 or more FTEs will need to insure at least 70 percent this year and 95 percent by 2016.

So what is a full-time equivalent employee (FTE)? It is someone who works at least 30 hours per week or whose service hours equal at least 130 hours a month for more than 120 days per year. Even if you don’t technically have 50 full-time workers, you could still be subject to the mandate penalty fees. For example, let’s say you employ 40 full-time workers (30+ hours per week) and 20 who work 15 hours per week. In this case, you have the equivalent of 50 full-time employees under the ACA and you would be subject to the mandate penalties.

Under the ACA, state and federal governments, employers, insurers and individuals share the responsibility to reform and improve the health care situation in the United States. The penalty fee (referred to as the Employer Shared Responsibility Payment) for businesses who have 50 or more employees and don’t offer health insurance is $2,000 per year, per employee.

So what does the Affordable Care Act mean for small businesses? Well, if you have fewer than 50 employees, the penalties do not apply to you. However, it is still important to consider offering coverage to your workforce. One way to do this affordably is to see if you qualify for the Small Business Health Options Program (SHOP). This marketplace enables you to offer high-quality coverage at a lower price.

If you have 50-99 FTEs, you must insure 95 percent of them by 2016. Thankfully, you still have the rest of 2015 to get things in place. The cost of the insurance is typically shared by the employer and the employee, so you don’t have to bear the total cost burden. Premiums can range anywhere from $150 a month for an individual to several hundred a month for a family.

How do you go about getting insurance for your employees? Here are some options:

  • Buy directly from a health insurance company
  • Use an insurance broker
  • Use health insurance offered by your payroll company

If you would like more information about the Affordable Care Act and how it may affect your business, AmCheck can offer additional assistance with our health care reform services.