The intent of the Affordable Care Act (ACA) was to tackle problems plaguing the health care sector, including rising insurance costs and expanding access to affordable care. Understanding the ACA can be tricky for small business owners without a background in insurance, but there are a number of straightforward guidelines to aid you in determining whether you must comply with these regulations.
The 50 FTE Rule
The good news is, businesses with fewer than 50 full-time or full-time equivalent (FTE) employees are not required to offer health insurance, notes Small Business Majority. This includes combinations of full- and part-time employees who add up to the equivalent of 50 full-time workers, the threshold for mandated compliance with the Employer Shared Responsibility provisions, according to the IRS.
If your staff size is approaching 50 employees and set to grow, it's important to know the applicable rules. Businesses with 50 or more employees can face fines if they don't offer health insurance coverage, even if they reimburse employees who arrange their own insurance. According to the National Federation of Independent Business (NFIB), 14 percent of small businesses that do not offer health insurance packages to employees offer reimbursement.
Benefits of the ACA for Small Businesses
Even if you are not subject to the Employer Mandate Shared Responsibility provisions, you may still want to consider offering health insurance packages to help improve employee satisfaction, engender staff loyalty and gain a competitive edge when hiring.
To help with the expense, explore the Small Business Health Options Program (SHOP). This insurance marketplace is specifically aimed at small businesses and helps them pool their purchasing power to get better rates from insurers, providing them with the same advantages large businesses have long enjoyed. Currently, businesses with 50 FTE or fewer employees can use SHOP exchanges; some states may have different maximum employee amounts. Your state's department of insurance can help you determine eligibility.
Tax credits may also be available for small businesses that purchase health insurance plans for employees through exchanges. The IRS states that those with fewer than 25 full-time or full-time equivalent employees, that pay an average wage of less than $50,000 and that contribute at least 50 percent of the cost of the premium, are eligible for tax credits of up to 50 percent of the employer contribution.
A number of resources are available to help small and midsized businesses in understanding the ACA, including NIFB's Healthcare Playbook. Small businesses that take advantage of the clauses aimed at making it easier to provide health insurance premiums to their workers will find themselves at competitive advantage over those who don't — you'll be better placed to both hire and retain valuable staff members.
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