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The AR Group

The Affordable Care Act and Your Small Business

By Victoria Aguilar and Kyontha Nelson

With the New Year came a lot of things ? New Year?s resolutions both personal and professional, and new beginnings.? This New Year, however, is particularly unique for business owners in that it brings with it the implementation of the Patient Protection and Affordable Care Act (?ACA?).? Pub.L. 111-148.? As a result, with the advent of 2013, business owners of all types and sizes have had to confront new opportunities and obligations presented by the ACA?s provisions.

At The AR Group, we have been particularly busy responding to client questions related to how the ACA impacts small business owners.? Questions like:

  • How does the ACA affect small businesses with slightly more than 50 employees, some of whom are full and others part time?
  • How does the ACA impact a swiftly growing business with 45 current employees that needs to hire more early in and throughout the New Year?
  • What can an employer do to avoid reaching the 50 full-time employee threshold?
  • How does the ACA affect my business if I already (or am willing to) provide health care benefits to my 10 employees?

As this small sampling of questions illustrates, implementation of the ACA brings forth a broad spectrum of issues facing businesses today.? While answers to these (and other) questions vary, the questions themselves represent real concern over risk, reward, and opportunity related to the ACA?s passage.? This blawg is intended to help address some of the fears expressed by small businesses as they grapple with implementation of the ACA.? (We will separately blawg about the ACA?s impact on large businesses (i.e., those with 50 or more employees)).

To some extent, small businesses can and will benefit from the ACA.? (See Top Things to Know for Small Businesses)? Most professionals now agree that its implementation should lower premium costs and will increase access to quality and affordable health insurance for many.? After all, increased access to health care and lower costs for many means a healthier workforce?a good thing for employers.? Still, there is no denying that the ACA will increase compliance obligations for many employers, and thus their risk, to say nothing of increased direct and indirect costs.? Nevertheless, the ACA has been implemented and businesses, large and small, must arm themselves with a working knowledge of its implications.? The AR Group stands ready to assist small business clients in working to reduce the risk to your business and to ensure that your business capitalizes on the ACA?s advantages, to the extent practicable.

1.? Businesses with Fewer than 25 Employees – Small Business Tax Credits
The ACA does not require small businesses to provide health insurance.? The ACA does, however, offer tax credits or incentives for eligible small businesses that choose to provide insurance to their employees.? To qualify for a small business tax credit of up to 35% (up to 25% for non-profits), small businesses must:

  • Have fewer than 25 full-time equivalent employees
  • Pay average annual wages below $50,000
  • Contribute 50% or more toward employee health insurance premiums

Notably, the tax credit increases to 50% (35% for non-profits) beginning in 2014 and is available to qualified small businesses that participate in the Small Business Health Options Program (SHOP) Exchanges.1??Read more?

2.? ?Businesses with 50 or Fewer Employees – Affordable Insurance Marketplaces
While the ACA does not require businesses to provide health insurance, beginning in 2014, small businesses with 50 or fewer employees will be able to purchase coverage through SHOP marketplaces.? Open enrollment begins on October 1, 2013 for the SHOP marketplaces and through SHOP, small businesses will receive the benefit of increased purchasing power, similar to that of large businesses, thereby reducing costs.? The SHOP Marketplaces and Individual Marketplaces for those who are self-employed open on January 1, 2014.

3.??Businesses with 50 or More Employees – Employer Shared Responsibility Provisions
Employers are not required to provide coverage to employees under the ACA.? However, beginning in 2014, businesses with 50 or more full-time employees (or full-time equivalents) may be subject to an employer-shared responsibility payment if the business:

  • Does not offer affordable health insurance that provides a minimum level of coverage to substantially cover all of its full-time employees (and their dependents), and
  • Has at least one full-time employee who receives a premium tax credit to purchase coverage in an insurance Marketplace.2

Businesses that meet or that are close to the 50 full-time employee threshold are wise to understand how these rules may apply and how the employer-shared responsibility payments can be triggered.? Read more?

Obviously, much still needs to develop throughout the course of 2013, and as things progress toward October, when the open enrollment period begins, more opportunities and obligations are likely to present themselves.? The AR Group remains available to answer questions to help your small business understand both its risk and opportunity in this ever-evolving area.

SMART TIP:? Be sure to carefully consider whether your company would benefit from the ACA using tax credits offered to companies that voluntarily offer a health care benefit.? And do not assume that just keeping your workforce under 50 full-time employees ultimately promotes your interest as a growing business.? These complicated issues require thoughtful analysis, and you should consider consulting with a professional who is well versed in this complex and emerging area.

Key Words:? Affordable Care Act; Compliance; Health Care


1?The following eighteen (18) states have been conditionally approved to operate State-based Exchanges: California, ?Colorado, Connecticut, District of Columbia, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, and Washington.? Both Arkansas and Delaware have been conditionally approved to operate a State Partner Exchange.

2?A full-time employee is generally one who is employed an average of 30 or more hours per week.