While small businesses aren't required by federal law to have coverage for their staff, most want to offer coverage if they are financially able to do so.
(Note: There's no mandate for companies with fewer than 50 full-time and/or full-time equivalent employees; the mandate for those with 50 to 99 such employees starts in 2016.)
1. Make plans by October 1
If you haven't yet made coverage plans for the coming year, now is the time to do so. Here are some reasons for prompt action:
- This gives you time to comparison shop your plan options. Compare your current plan, if you have one, with those being marketed for the coming year. Consider Health Savings Accounts (HSAs), which combine high-deductible health plans (HDHPs) with portable health savings accounts for employees. The minimum deductible and other HDHP requirements for 2015 (which usually translates into a bronze plan) can be found here.
- If you have a group plan now that you like and renew it before October 1, 2014, you can keep your current plan for 2015 (even if it lacks some provisions otherwise mandated for 2015 that would cost you more). Nonetheless, premiums for renewed plans may still be higher than they were for 2014.
- Employees who lack minimum essential coverage through you need to buy coverage for the coming year to avoid a penalty. This applies to employees who aren't insured through a government or other plan, and those whose employers don't have a plan or what's offered is not "affordable" to them as explained below, and they don't have coverage through a government plan or elsewhere. These employees can apply during open enrollment in the government's exchange for 2015 plans, which begins on November 15, 2014.
2. Consider the federal tax credit
If you pay at least half the cost of coverage for your employees, as a small employer you may be eligible for a 50% tax credit (the portion of premiums not used for the credit remains tax deductible). This will help to lower your out-of-pocket cost for providing this valuable benefit. However, there are certain important factors to keep in mind:
- You only qualify if you have a set number of workers with an average payroll below a set dollar amount (you may qualify for a partial credit if you fall within a range for payroll size and amount).
- You must buy coverage through the Small Business Health Options Program (SHOP), which is a government exchange (marketplace). The federal SHOP website is not yet available (it's anticipated to be online by November 2014 for buying 2015 coverage but additional delays are possible), but you can call the SHOP Small Employer Call Center at 1-800-706-7893 Monday through Friday, 9 a.m. to 7 p.m. EST. You can also download an application from HealthCare.gov at https://www.healthcare.gov/downloads/shop-employer-application.pdf to apply by mail.
3. Understand what affordable coverage means to staff
Even if you have a plan, an employee may opt not to join because the cost to him or her is too expensive. If coverage is "unaffordable," the employee may be eligible for the premium tax credit from the federal government to help pay for individual coverage purchased through a government exchange.
In 2014, employer coverage was treated as unaffordable if it cost the employee more than 9.5% of household income. In 2015, that percentage rises to 9.56%. Since household income may not be known for the coming year, there are certain safe harbors that can be relied upon to make a determination as to whether employees can treat employer coverage as unaffordable.
4. Different rules apply to self-employed individuals
For purposes of health coverage, self-employed workers are not treated as small businesses but as individuals. They use the government exchange for individuals and families rather than the SHOP if they want to buy coverage in this manner. They can also go through agents or directly to insurance companies for individual coverage. Self-employed individuals continue to deduct their premiums as an adjustment to gross income (not as a business expense). Those who have household income below set limits may qualify for the premium tax credit to help pay for coverage.
Note: There's an interdependency between the deduction and the credit that requires complicated tax computations. Fortunately, they are handeld by tax preparation software and tax professionals.
The Affordable Care Act complicated health coverage for businesses and individuals. Unfortunately, there's no single source for definitive answers to many open questions, but the sooner you get started lining up your coverage for 2015, the more time you'll have to resolve your issues and concerns.