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From now until 2013, small-business owners who provide insurance for employees will be able to get a tax credit equal to 35 percent of their contribution toward the premium cost, if they contribute at least 50 percent.
According to healthcare.gov, a U.S. Department of Health & Human Services website that explains the Affordable Care Act passed in March, the credit is good for small businesses that have 25 employees or fewer and pay average annual wages below $50,000. Non-profit organizations meeting the criteria are eligible for a 25 percent credit. And starting in 2014, the small business tax credit rises to 50 percent and 35 percent for non-profit organizations.
Small businesses will be required to offer coverage starting in 2014 or face penalties. While some may simply opt to pay the penalties, the tax credit is designed to help those who want to add coverage but haven't been able to afford to do so. The 2014 implementation of health care reform is expected to cover 32 million Americans who don't have any, according to healthcare.gov.
Last year, 46 percent of employers with three to nine workers offered health insurance coverage to their employees, according to Families USA and Small Business Majority. The percentage rose with the number of employees: 72 percent of businesses with 10 to 24 employees offered it and 95 percent of employers with more than 50 employees did so.
Businesses that may be eligible for the tax credit will receive a postcard from the Internal Revenue Service with instructions how to apply for the credit.
The tax credit will be available for a maximum of six years. The tax credit is making it possible for businesses to afford to provide coverage for six years, however there is some concern as to what happens in year seven when it goes away.
Some small businesses are concerned about new paperwork requirements for businesses and that more burdens may be coming as regulators decide what the bill means.
An estimated 80 percent of existing small-business plans will be exempt from the reform law under a "grandfather" provision that allows plans created prior to March 23, 2010, to avoid many of the new requirements.
Now, for those with existing plans, also known as grandfather plans, they are allowed to keep their current plan as is. The rule allows plans to stay intact indefinitely but they lose their grandfather status if the plan significantly reduces benefits or increases an insured's out-of-pocket expenses beyond what they are in 2010.
Grandfathered plans can't cut or reduce benefits, such as dropping coverage for illnesses such as HIV or diabetes. They also can't raise deductibles, co-payments, share of medical bills and the percentage of the premium contributed by an employer can't drop more than 5 percent.
Grandfathered plans can't drop people for getting sick or making an unintentional mistake on their application, and they're not exempt from the expansion of coverage for young adults.
Some believe no plan will realistically be able to stay grandfathered for long. One expert believes simple inflation is going to drive changes in costs and expenses.
Sources:
Healthcare.gov
The News Tribune
MC Ortega is the former publicist for the late Walter Payton, Coca-Cola and Dunkin’ Donuts. Ortega is a senior communications and messaging executive specializing in media relations, social media, program development and crisis communications. Also, Ortega is an avid traveler and international shopper. Ortega resides with her partner, Craig, dog, Fionne and extensive shoe collection. Ortega also enjoys jewelry design/production and flamenco dancing.
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