The Patient Protection and Affordable Care Act of 2010 provided programs to increase and improve small business health insurance for owners and employees. It provided incentives and rewards for small employers to add health insurance benefits for their employees. Businesses with 49 or fewer employees could benefit from ACA small business programs, and those with 24 or fewer employees could get tax relief. In the overall design of the Affordable Care Act, small employers were a priority group. Many Americans either own or work for small businesses. Key employees are critical to business success. Before the passage of the ACA, small employers were at a disadvantage when seeking health insurance coverage due to the small size of their workforces.
Proprietors Are Not Small Businesses
The definition of a small business excludes sole proprietors and owner operators with no other full-time employees. Business owners are eligible to participate in group plans provided for employees, but there must be one other full-time employee not related by family or marriage. Sole proprietors and owner-operators can apply for individual insurance through a state or federal health insurance exchange.
The Small Business Disadvantage
Studies before the passage of the ACA noted that small businesses had a clear disadvantage in locating affordable group health insurance for employees due to the small number of employees in the employer’s group. The small size of the group restricted the variety of plan options available since offering a menu of plans would further reduce the numbers of employees selecting a given plan or option. The ACA created a method of pooling the employees from many small employers into a large group. This pool would compete for volume discount pricing and receive plans and options similar to those offered to large employers.
Small Business Tax credits
The ACA provides tax credits for small businesses that add health insurance coverage for employees. Non-profit as well as for-profit businesses and organizations can apply for the credits. The law provides larger tax credits to smaller employers. The largest percentage of credit goes to employers with ten or fewer employees. The credits have a two-year eligibility period. Owners can apply credits forward or backward, and pick years in which there was a profit.
The SHOP Advantage
The Small Business Health Options Program is a dedicated portal for small businesses. It is a specialized insurance exchange. The SHOP portal provides qualified plans. It is the exclusive access to the ACA small business tax credits. Eligible businesses have 24 or fewer employees, pay a minimum of fifty percent of employees’ premiums, and the salary average is $50,000 per year or less. The credit is for up to fifty percent of the employer contribution. The law weights the employer tax credit so that the maximum credit goes to employers with ten or fewer employees, averaging $25,000 per year or less. The maximum credit amount for tax-exempt employers is 35 percent of the employer contribution.
The Initial Run
Calendar year 2015 will be the first full year of the ACA small business features. The portal is open year around and there is no open season limit on enrollment. It will provide robust programs, tax credits, and opportunities for expanding employee health benefits among small employers. As business owners, studies found that the lack of insurance among this group was essentially similar to the population as a whole. The insurance benefits of the ACA can increase coverage among small business owners too. This has a long-term value to the economy, because like key employees, the health of business owners can determine the success or failure of small businesses.