On June 25, 2015, the U.S. Supreme Court upheld the Administration’s view about the Affordable Care Act (“Obamacare”) that subsidies (federal tax credits) apply to qualified individuals who obtain coverage through either a state or federal exchange. The decision is clearly a relief to individuals who had obtained coverage from the federal exchange and could have lost their subsidies had the Court ruled otherwise. But what does it mean for small businesses?
Employer mandate for “small” large employers to take effect
The decision has no impact on the employer mandate, which requires large employers to provide affordable coverage for full-time workers or pay a penalty. This mandate became effective at the start of this year for employers with 100 or more full-time and full-time equivalent employees. The mandate extends on January 1, 2016, for employers with 50 to 99 full-time and full-time equivalent employees.
Higher premiums for 2016
It’s been reported that many insurers have requested significant (double digit) premium increases. Proposed rate hikes of 10% or more are reported on Healthcare.gov (California and New York information has not been included).
While the final premiums for 2016 won’t be known until October (state insurance departments must approve the rates), we can assume that some increases are likely.
- Are you prepared from a budget perspective to handle the increase?
- Will you be eligible for the small employer health insurance credit? This 50% credit applies if you pay at least half of premiums covering employees and you meet other requirements. However, if you took the credit in 2014 and will take it in 2015, you won’t be eligible in 2016. The credit can only be claimed for two consecutive years.
The Court’s decision on Obamacare isn’t the last word. While the present Congress can do little to change the law because of a veto threat, if there is a new President in 2016 and a Congress sympathetic to him or her, things could change. Stay tuned!