The Patient Protection and Affordable Care Act and Small Business Owners

The U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act (PPACA) in June 2012, effectively paving the way for its implementation. With the president’s reelection, it’s clear that the healthcare legislation, commonly known as Obamacare, is here to stay. Many of the major elements of this legislation are set to go into effect in late 2013, early 2014, which is not that far away. So what exactly is this going to mean for small business owners, both as healthcare consumers and as employers?

A new Kaiser Family Foundation study examined the state of insurance coverage for businesses with fewer than 25 employees: specifically looking at where small business owners get their personal coverage. What the study found is that when it comes to health insurance, small business owners are in a similar predicament as the average employee, with 25 percent uninsured, 50 percent receiving insurance via a family member or by purchasing a private plan, and only 19 percent getting the insurance through their company. Once the PPACA kicks in, 60 percent of entrepreneurs who buy private insurance and have incomes up to 400 percent of the poverty level will qualify for tax credits and 83 percent of uninsured business owners will be eligible for subsidized coverage.

The 2012 National Survey of Employer Sponsored Health Plans looked at how Obamacare might impact small business owners in their capacity as employees (from 10 to 500+ employees). The study predicts that the average per-employee cost of health coverage will rise above 6.5 percent in 2013, and that while very few employers anticipate terminating health benefit plans, smaller employers are nearly three times as likely to say that they will, as penalties will not apply to companies with fewer than 50 employees.

So what will the 2013 healthcare law look like for small business employers and owners? Following are some of the more impactful provisions that will go into effect next year:

W-2 reporting: Starting in January 2013, tax form W-2s issued for 2012 earnings must for the first time show the benefits employees receive from their employer-sponsored health care in an effort to boost transparency. Small business owners can expect to see a slight increase in W-2 preparation costs to meet this requirement.

Tax credits: The tax credit for employer contributions toward employee insurance that went into effect in 2010 will continue at the rate of 35 percent in 2013. This rate is scheduled to increase to 50 percent for tax year 2014.

Exchange enrollments: On October 1, 2013, open enrollment for individual and small business health insurance exchanges is set to go into effect. These exchanges will allow individuals and small businesses with up to 100 employees to shop for qualified health insurance coverage online, with the goal of lowering costs and improving choice of plans.

Reference:

Klein, Karen E. “What Obamacare Means for Small Employers in 2013” Bloomberg Businessweek. 10/4/12.