The ACA is a major healthcare reform and the most significant change to the healthcare system since Medicare and Medicaid. One area that’s been affected dramatically is the way that businesses offer health coverage to employees. The primary factor that determines how a company is affected is the size of its workforce. Let’s now take a look at the differences between small businesses vs. large businesses.
ACA for Small Business
Small businesses are by no means impacted in the same way that large businesses are. For employers with fewer than 50 employees, it’s their choice whether or not they want to offer coverage. On the other hand, businesses with more than 50 employees are obligated to provide coverage or they may be hit with an employer shared responsibility payment (ESRP). This occurs if one or more employees receive a premium tax credit from the health insurance marketplace.
Businesses with more than 50 workers will be fined $2,000 per employee excluding the first 30 employees when they don’t offer coverage to full-time employees. It’s also important to remember that the hours of several part-time employees can be combined to equal that of a full-time employee. Therefore, this should be taken into consideration when determining the number of full-time employees.
A common misconception is that small businesses have to provide health coverage to workers or they will be penalized. This isn’t the case, and any company with fewer than 50 employees isn’t required to offer coverage and will not incur any penalties. However, there are some definite advantages of small business owners offering coverage to workers.
Benefits of ACA
Perhaps the biggest benefit of the ACA is the tax credits that employers can get. Prior to 2014, they could only get a tax credit of up to 35 percent of their employees’ contributions. Starting in 2014 and going forth, they can now get up to 50 percent as long as they purchase coverage through the SHOP marketplace. Unlike in the past where business owners were often forced to complete a lot of administrative tasks, the establishment of online healthcare exchanges has simplified things considerably. Consequently, they aren’t required to fill out piles of paperwork and can provide employees with quality health coverage with minimal hassle.
Due to the number of different health insurance plans available through the marketplace, employees are usually able to find the right coverage for the right price. There is a high level of customizability so all of their healthcare needs can be taken care of without being over-insured. Because healthcare providers cannot discriminate against individuals with existing medical conditions, the ACA makes it possible for nearly everyone to get coverage at a reasonable price.
The bottom line is that offering health coverage is simply an option for small businesses and a requirement for large businesses with more than 50 employees. Smaller operations don’t have to deal with penalties, while larger ones may have considerable penalties if they fail to provide coverage. However, with multiple benefits of the ACA, it would still behoove many small business owners to provide health insurance to their employees.