Will the Health Care Reform Bring Financial Woes to Your Business?

Association of Business Training
April 2, 2013 — 1,005 views  

Small businesses play a very important role in the economic growth of any nation. The impact of the current healthcare reforms on small businesses and their employees in the US is not good. Small businesses provide much higher percentage of start-up jobs, and they are a key source of grass-root level innovation. If you own a small or medium-sized business, you definitely need to know the pros and cons of the current laws affecting your business. Many current laws affect both small and large enterprises. The following article brings together a few details about the different provisions in healthcare law affecting the economic growth of businesses.

Current Healthcare Law

Patient Protection and Affordable Care Act (PPACA), signed by President Obama in March 2010 contains several provisions that affect business at many levels. The law allows self-employed business proprietors to take tax credit for complete health insurance covering themselves and their spouses. Employees are making their staff pay for better healthcare in cash, thus boosting the revenue to more than $3 billion, bought only by small enterprises in the year 2010.

Tax Credit for Small Businesses

Included in the (PPACA), are provisions for small businesses to get a tax credit, offering overall health coverage to their employees. To avail the credit, the employer has to pay at least half the cost of individual coverage for their workers. The credit system aims to uplift small businesses that provide employment to small or medium-income employees.

In the budget years from 2010 to 2013, 35% of the premium paid by small companies was given as maximum credit. Smaller companies employing an average of 10 permanent employees receive the maximum credit. Because the eligibility criterion is mainly based on the number of permanent employees and not on the number of total employees, small companies having part time jobs may not qualify in this case. Businesses employing more than 25 permanent workers or pay $50,000 as average wage per year are not eligible for the tax credit.

Provisions for Self-Employed Business Owners

The Patient Protection and Affordable Care Act (PPACA) affects self-employed proprietors of small businesses the most. It provides a complete family health insurance for the owner. Small companies employing less than 25 permanent employees get a tax credit for providing healthcare coverage to their employees in an affordable range. Also, the law states that it is mandatory for larger companies employing more than 50 workers to provide healthcare coverage for the employees or pay a penalty.

Follow Three Simple Steps

To determine whether a company is eligible to avail the tax credit or not, there exists a simple three-step worksheet according to the current health plan. Filling up that worksheet will give you a clear picture.

Number of FTEs (Full-Time Equivalent employees) for the Tax Credit

Only small companies employing more than 25 full-term workers qualify for the healthcare tax credit. Availing tax credit eventually reduces wages but the employees don’t have any other option. They cannot bargain with the insurance companies the way their organization can. So, most of them happily settle for the same level of insurance at a higher price, if at all they had obtained one for themselves.

Association of Business Training