How the Affordable Care Act Affects Small Business

The Affordable Care Act was created to provide affordable healthcare coverage to American citizens, and one of the ways that it does this is to require that businesses that have 50 or more full-time employees offer it to their full time workers as well as their families.

If you own a business that has fewer than 50 full time employees, then you may not have this requirement, but there are a number of different options, opportunities, and obligations that you still need to be aware of. You also need to have a complete understanding of how the government expects you to calculate the number of employees that you have, because it is not as straightforward as it might seem.

Correctly Calculating the Number of Full Time Employees You Have

At first glance, it would seem easy enough to ascertain the number of full time employees that you have, but the calculation that the government uses to establish the 50-employee threshold is complicated.

Companies need to first determine the number of employees that they employ who work 30 hours or more per week. These are classified as full-time employees.

The next step is to calculate how many full-time equivalent employees you had each month in the previous calendar year. This is done by adding up all the hours worked by part-time employees in each month, and then dividing that number by 120.

After going through this process for each month, you add up each month’s numbers and divide by 12, and that gives you the government’s interpretation of how many full time equivalent employees you had during that year.

Though this process may seem cumbersome, it is well worth doing, if only because of the potential fines that are faced. When a company does not offer affordable health care coverage to employees and is officially determined to have 50 or more employees, they face enormous penalties.

If you feel that you need help with this calculation, don’t hesitate to contact our professional staff for help.

Obligations and Opportunities for Companies Under the 50-Employee Threshold

If you have correctly done the calculation and are certain that you fall under the 50-employee threshold, then you have no legal requirement to provide affordable health coverage for your employees.

Nor do you need to follow any of the reporting requirements that larger companies are subject to unless you voluntarily provide insurance and are self insured. If this is the case, then you need to file specific forms for each employee – Form 1094-C and 1095-C.

Businesses with fewer than 50 full time employees are under no legal obligation to provide their workers with affordable health insurance, but that doesn’t mean that they shouldn’t or don’t want to.

For those companies that are interested, the government provides the Small Business Health Options Program. Also known as the SHOP Marketplace, it offers businesses the opportunity to provide affordable insurance coverage for their employees.

For businesses who have fewer than 25 full time equivalent employees with annual wages averaging less than $50,000, the program offers the opportunity to get a small business health care tax credit for two years. In order to qualify, the insurance must be purchased through the Small Business Health Options Program, and must provide coverage to a minimum of half of the insurance premium costs for their full time employees.

When businesses take advantage of this program, they get a small business credit, but this tax advantage is only offered for two years, and according to a report issued by the General Accounting Office, fewer businesses have taken advantage of it than had originally been anticipated.

Employees of businesses that do take advantage of the credit, who would have been able to qualify for the premium tax credit subsidy if they’d purchased their own coverage directly through the individual marketplace, will no longer be able to qualify.

Contact us for Assistance

The Affordable Care Act has created a new level of complexity for businesses of all sizes. If you need assistance in determining your own obligations and responsibilities, our office is ready to help.

Contact us to set up an appointment at 646-807-9995 today!