Small Businesses and The Affordable Care Act..........

By: Taylor

Small businesses have to pay higher cost to provide health insurance to its employees compared to large businesses. In fact, due to the small business owner’s lack of purchase power, they pay – on average – 18% more on health insurance per employee, when compared to their larger counterparts. Many times, these higher insurance costs causes wages to be lower, or the employer is forced to allow the higher costs to cut into their operating funds, funds which could otherwise be used for marketing, research and development or much needed investments. More often than not, this leaves their employees without the benefit of health insurance.

That’s about to change – The Affordable Care Act will provide some much needed relief to small business owners in two forms. First, Small Business owners will be able to purchase group health insurance for their employees beginning October 1, 2013 through the Small Business Health Options Program (SHOP). Secondly, certain small business owners who take part in purchasing insurance for their employees will be eligible for a tax credit. More on these points, and more below:

Any small business having less than 25 employees and paying average annual wages below $50,000 will qualify for tax credit if it provides health insurance to its employee. The Affordable Care Act offers this tax credit to balance the higher cost incurred on providing health insurance. The tax credit percentage applies to the out-of-pocket premium costs to the employer. For-Profit small businesses can be eligible for up to 35% while non-profit organizations can receive up to 35%. In the next year, those percentages will increase to 50% and 35% respectively.
The Affordable Care Act has made another significant provision for small businesses. Employer-based plans providing health insurance to retirees ages 55-64 are now entitled to get financial help through the Early Retiree Reinsurance Program. The Early Retiree Reinsurance Program aims at lowering the cost of premiums for all employees. It will also reduce employer’s costs of providing health insurance.

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