Health Care Reform: What Small Businesses Need To Know

After much debate and several revisions, the health care reform bill has passed. With so many provisions governing several different aspects, what does this reform mean for small businesses? The following are a few brief issues covered by the bill that may affect your business:

Health Insurance (Penalty for Not Providing Insurance): Starting in 2014, if your business has more than 50 employees and you fail to offer health insurance or if your employees purchase subsidized health insurance instead of using employer-offered health insurance, your business may be required to pay a penalty of up to $2,000 per employee.

Heath Insurance (Tax Credits): Effective January 1, 2010, employers that provide health insurance for their employees may be eligible for tax credits of up to 35%-50% of annual premiums paid by the employer based on the number of employees and annual revenues. For more information on this tax credit, please visit http://www.irs.gov/pub/irsutl/3_simple_steps.pdf.

Health Insurance Exchanges: In 2010, certain small businesses and individuals will be able to purchase insurance on state-run health exchanges. Health insurance providers will offer multiple plans to qualified individuals/businesses at the discretion of the state.

Health Insurance Through a Spouse: If one of your employees chooses a spouse’s health insurance plan over the one you offer, no penalty will be assessed to you. This still means that you, as the employer, must offer a plan to avoid the penalty. However, you must ensure that your employee is truly enrolling on the spouse’s plan and not getting a subsidy, which will force a penalty upon you as the employer.

Premiums on W-2 Forms: Beginning in January 2012, employers will be required to list the value of an employees health insurance benefits on the standard W-2 form. Taxes of 40% will be implemented on health insurance benefits starting in 2018 for benefits in excess of $10,200 for a single person and $27,500 for a family.

COBRA Insurance: Workers that are not terminated due to gross misconduct can apply for COBRA if their employer has more than 20 employees. With the new law, workers can still apply for COBRA, however, they can also apply for health insurance through the state-run exchanges.

Health Insurance for Dependents (up to Age 26): New provisions with regard to dependents provide that dependents up to age 26 under certain circumstances may still qualify under their parents’ insurance. As is the case now, it is expected that employers and employees will share the cost for these older dependents. The language of the law is still unclear as to what factors in particular qualify an older child to be a dependent.

Breastfeeding Mothers: If a woman has a child under one year of age, employers must provide a clean and private space where the mother can use a breast pump, and give the mother a reasonable amount of time to lactate each day. A restroom does not qualify as a private lactation room. Businesses with less than 50 employees can qualify for an exemption if this law would create an undue hardship.

Tanning Salons: Indoor tanning salons will be required to pay a 10% additional tax on tanning sales.

Employers with Seasonal Employees: Employers with at least 50 employees who work at least 120 days out of the year still must provide health insurance to employees or will be penalized. There are certain exceptions for employees who work less than 30 hours per week. There is no pro-ration on the penalty.

Restaurants with 20 Chains or More: Restaurants and franchises with at least 20 locations will be required to put a calorie count on individual menus, drive-through boards and on the main menu board.

Flexible Spending Accounts: Health care reform will limit pre-tax contribution to flexible spending accounts to $2,500.00 per employee. Formerly, employers would set the contribution limits.

Many provisions of the this Act will not be put into effect for another few years, so many specific guidelines have not been necessarily been set in stone. As committees and governmental departments set more rigid standards, we will be sure to update you with the latest information that may affect your business due to health care reform.

For a full version of 906-page document entitled: The Patient Protection and Affordable Health Care Act, please visit: http://democrats.senate.gov/reform/patient-protection-affordable-care-act-as-passed.pdf

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