The Affordable Care Act includes new health care reform terms used to describe parts of the law that affect small business. Understanding what these terms mean can help both self-employed individuals and small employers better navigate the law and take advantage of reforms that are helping to lower premium costs and increase access to quality, affordable health insurance.
Here are seven terms in the Affordable Care Act that small businesses should know.
1. Affordable Insurance Exchange
Also known as the health insurance "Marketplace," the Affordable Insurance Exchange is a new transparent, competitive insurance marketplace where individuals and small businesses can purchase affordable and qualified health benefit plans. The Marketplace for small employers, known as the Small Business Health Options Program (SHOP), and the Individual Marketplace for consumers and those who are self-employed, will open in all states on January 1, 2014. Enrollment begins on October 1, 2013. To get the latest updates on enrollment, sign up for email and text alerts today.
2. Employer Shared Responsibility
Although employers are not required to provide health coverage to their employees under the Affordable Care Act, employers of a certain size will be subject to the Employer Shared Responsibility provision of the law. Under this provision, beginning in 2014, business owners with at least 50 full-time or full-time equivalent (FTE) employees that do not offer health coverage to their full-time employees may be subject to a shared responsibility payment under the health care law. A full-time employee is generally one who is employed an average of 30 or more hours per week. Businesses with fewer than 50 full-time or FTE employees are generally not affected by these provisions. To assist you, the IRS has developed a helpful set of Q&As.
3. Essential Health Benefits
The Affordable Care Act ensures that health plans offered in the individual and small group markets, both inside and outside of the health insurance Marketplace, offer a comprehensive package of items and services, known as essential health benefits. Essential health benefits must include services within at least ten core categories, among them emergency services; maternity and newborn care; prescription drugs; and preventive and wellness services. For more information on these requirements, visit healthcare.gov.
4. Individual Shared Responsibility
The Individual Shared Responsibility provision of the law applies to the self-employed and requires that each individual, beginning in January 2014, have basic health insurance coverage (known as minimum essential coverage) for each month, qualify for an exemption, or make a payment when filing a federal income tax return starting in 2015. Individuals will not have to make a payment under these rules if coverage is unaffordable, you spend less than three consecutive months without coverage, or you qualify for an exemption for several other reasons, including hardship and religious beliefs. To learn more, refer to this Fact Sheet from the U.S. Department of Treasury, as well as these Q&As, or consult with your tax professional.
5. Premium Tax Credits
When enrollment through the health insurance Marketplace starts in October 2013, consumers and self-employed individuals may be eligible for a new kind of tax credit you can use right away to lower what you pay for your monthly health plan premiums. Individuals who qualify can take the premium tax credit in the form of advance payments to lower their monthly health plan premiums starting in 2014, which can help make insurance more affordable. The value of the tax credit you’re eligible for depends on how much income your or your family expects to earn. Visit healthcare.gov to learn more.
6. Small Business Health Care Tax Credits
Although the Affordable Care Act does not require that businesses provide health insurance, it does offer tax credits for eligible small businesses that choose to provide insurance to their employees for the first time, or maintain the coverage they already have. To qualify for a small business health care tax credit of up to 35%, you must have fewer than 25 full-time equivalent employees, pay average annual wages below $50,000, and contribute 50% or more toward your employees’ self-only health insurance premiums. In 2014, this tax credit goes up to 50% and is available to qualified small businesses that purchase coverage in the Small Business Health Options Program (SHOP) Marketplace.
7. Wellness Programs
A wellness program is defined as a program intended to improve and promote health and fitness that is typically offered through the workplace, although insurance plans can offer them directly to their enrollees. The program allows employers or plans to offer employees premium discounts, cash rewards, gym memberships, and other incentives to participate. The Affordable Care Act creates new incentives to promote employer wellness programs and encourage opportunities to support healthier workplaces. To learn more, visit healthcare.gov.
Credit: US Small Business Administration – www.sba.gov
Meredith K. Olafson is Senior Policy Advisor for the U.S. Small Business Administration where she oversees the agency’s education and outreach efforts around health care and the Affordable Care Act.