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Affordable Care Act


The Patient Protection and Affordable Care Act (PPACA), commonly called the Affordable Care Act (ACA) or “Obamacare”,is a United States federal statute signed into law by President Barack Obama on March 23, 2010. Together with the Health Care and Education Reconciliation Act, it represents the most significant regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965.

On June 28, 2012, the United States Supreme Court upheld the constitutionality of the ACA’s individual mandate in the case National Federation of Independent Business v. Sebelius. However, the Court held that states cannot be forced to participate in the ACA’s Medicaid expansion under penalty of losing their current Medicaid funding. Since the ruling, the law and its implementation have continued to face challenges in Congress, in federal courts, and from some state governments.

Summary of ACA and Small Business

ACA creates the Small Business Health Options Program or SHOP, a part of each States Health Insurance Marketplace, where small businesses with under 50 full-time equivalent employees can shop for group health plans starting October 1st, 2013. In 2016 those with 100 full-timers or less can use the SHOP.

• Taxes and tax credits are based off of the number of full-time equivalent employees (FTE) and their average annual wages, not solely on the number of full-time employees.

• Small businesses with fewer than 25 full-time equivalent employees with average annual wages below $50,000 can get tax credits (as adjusted for inflation beginning in 2014) to help pay for employee premiums.

• Small businesses with more than 50 full-time equivalent employees with average annual wages above $250,000 must provide health coverage to full time employees come 2015. This is sometimes called “the employer mandate”.

• Businesses making over $250,000 in profit must pay a .9% increase on the current Medicare part A tax. The tax is split (.45% each) between the employer and employees making over $200,000 individual ($250,000 family).

• All businesses with over 50 full-time equivalent employees have to let their employees know about their State’s Health Insurance Marketplace / exchange.

ATTENTION! ACA Small Business employer mandate has been delayed until 2015.

Positive Effects of ACA on Small Business

ACA provides small businesses with affordable insurance options, cost assistance and increased buying power via the SHOP exchange (explained below). Since small businesses with under 50 full-time equivalent employees can use the SHOP to get better deals on employee insurance, but aren’t mandated to do so, it’s safe to say small businesses will not be hurt by ACA, but will in fact benefit.

• The smaller the businesses the better the tax breaks.

• Businesses with over 50 full-time equivalent employees are exempt from the fee on their first 30 full-time workers greatly reducing the negative affect the law could have on businesses who just barely qualify as a large firm.

• The Employer mandate isn’t meant to hurt small businesses, it’s to ensure that companies like Walmart take a Shared Responsibility in providing healthcare access to more Americans.

• Small employers can see up to a 50% reduction in their share of the cost of employee premiums. The amount employers do pay is tax deductible and can be carried forward or backward.

• Small employers can offer better quality benefits due to the increased benefits, rights and protections offered by ACA.

• Due to small businesses being able to shop for group health plans on their State’s Health Insurance Marketplace via the SHOP, AKA the Small Business Health Options Program, small businesses now have the same buying power as larger firms. Along with tax credits, increased buying power helps small businesses afford to provide benefits to their employees.

• All new ACA larger small businesses and higher income employees pay help to make all the benefits, rights and protections of the law possible including subsidized insurance for low-to-middle income Americans, small businesses, and Medicare.

Small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.


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