What Obamacare Means for Small Business

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When asked in a recent Kaiser survey what Americans thought about the Affordable Care Act (aka Obamacare), a majority—some 57 percent—said they didn’t know enough about the law to know how it’ll affect them when the law’s big changes kick in. In a word, we’re confused.

And now another survey, out this week, says that small business owners are also among those who are befuddled: eHealthinsurance.com, an online health insurance firm based in Mountain View, California, talked to 259 owners of small businesses and found that 56 percent said they don’t understand the employee mandate that requires employers to offer insurance or pay a penalty into a coverage fund. 

Oddly, that ended up being a bit of good news, since that figure is down from the 69 percent of small biz owners in an August 2012 survey who said they didn’t follow what the mandate means, according to Sande Drew, a spokesman for the site. The small business owners who participated all have fewer than 50 employees and currently provide health insurance to their workers.

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But other results of the survey show that many still don’t understand how the law may impact their firms: Thirty-two percent think they’ll be required to continue providing coverage in 2014, and an additional 24 percent believe they have to pay a tax penalty if they don’t offer group coverage.

Neither is true, according to Anthony Lopez, a licensed health insurance agent and small business expert at eHealthinsurance.com, who says there’s a big need for consumer education about the Affordable Care Act (ACA). “We hear every day from small employers who are worried and upset about the burdens and expenses they believe the health reform law will place on their businesses,” says Lopez. “But while larger businesses will face mandates and penalties as a result of the law, most of the businesses that you think of when you hear the words ‘small business’ won’t be required to do anything at all. In fact, some small businesses today may benefit from health reform in surprising ways.”

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Here’s what you need to know if you have a business with fewer than 50 employees:

·       Most small businesses today won’t be required to provide health insurance to workers in 2014. Beginning January 1, 2014, small businesses with 50 or more full-time workers (or with part-time employees who work a total number of hours equivalent to 50 full-time workers) will be required to provide health insurance to their employees. Businesses in this category that fail to provide coverage will face possible tax penalties. However, the vast majority of small businesses in the U.S. have fewer than 50 full-time workers, says Lopez, and will be exempt from the requirement to provide coverage. They will be free to provide health insurance to workers or not. Either way, they will face no tax penalties.

·       Small businesses that do provide coverage may qualify for special tax breaks. Some small businesses that aren’t required to provide coverage, but do so anyway, may be eligible for special tax credits. Small businesses with no more than 25 employees and with average annual wages of less than $50,000 may receive a credit for up to 35 percent of what they contribute towards employee premiums. (This small business health insurance tax credit has been available since shortly after the health reform law was signed 2010.) Beginning in 2014, the tax credit increases to a maximum of 50 percent of the amount small businesses contribute towards employees’ monthly premiums.

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The eHealthInsurance survey found that 67 percent of small business owners said they had no plan to drop coverage in 2014. And three-quarters of those surveyed said that they provide health insurance because they feel morally obliged to do so, or because it helps them recruit the best workers.

But that could change. Currently, in most states, the only way for some people with pre-existing medical conditions to get health insurance is through an employer-sponsored plan. But beginning in 2014, people with pre-existing conditions will be able to purchase individual health insurance plans. Consumers can start comparison-shopping for a plan on October 1, 2013, and begin coverage on January 1, 2014. Individuals earning less than 400 percent of the federal poverty level may qualify for federal subsidies to help them afford it.

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Not all small businesses or their advocacy groups agree on the ACA’s benefits to small firms and their employees. Rhett Buttle, vice president of external affairs for the Small Business Majority, an advocacy group in Washington, D.C., says “Obamacare will help many of them better afford insurance or even provide their employees with coverage for the first time through provisions like state exchanges, which have the ability to rein in costs by reducing administrative fees and giving them the sort of negotiating power that was previously only enjoyed by large companies.”

If you have fewer than 50 employees you don't have to provide them with coverage and you won't be penalized if you don't.

But some small business owners are concerned by the new reporting requirements the ACA requires. “Keeping up with implementation of regulations will be costly, time-consuming, and difficult. Employers like me must track and monitor employee hours and report and verify health insurance coverage,” says Hugh Joyce, who testified last month before the House Ways and Means Committee on behalf of the National Federation of Independent Business, which opposes many provisions of the ACA that impact small businesses. Joyce told the committee, “The penalty structure and compliance requirements act as a disincentive for many to provide coverage at all.”

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“I think that some businesses owners are not sure how [the Affordable Care Act] will affect their costs and are concerned about what increases the new system could bring,” says Chris Yura, 32, CEO of SustainU, a Morgantown, West Virginia, clothing company that makes all its clothes in the U.S. using recycled materials. “I would like to have a more standardized way of comparing, evaluating, and purchasing our health insurance plan to gain a better understanding into the coverage and the cost associated,” says Yura. “I believe this new system can lend greater insight into the plans and ultimately better coverage at more affordable prices.”

Find more information on small businesses and the Affordable Care Act check out the information at Healthcare.gov.

Are a you a small business owner? Are you afraid of the coming changes under Obamacare, or do you think you will you benefit from them?

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• Why Everyone Under 26 Should Thank Obamacare


Fran Kritz is a freelance writer specializing in health and health policy who lives in Silver Spring, Maryland. Takepart.com

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