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Obamacare Small Business Quick Start Guide

Obamacare.v2Whether you’re angry, happy or just plain confused about how “Obamacare” (a.k.a. the Affordable Care Act, or ACA) will impact your business, my best advice is this: Get over it!

Official start date is January 1, 2014, but some provisions are already in place (such as healthcare tax credits for small biz) with more coming soon. Time to buck up and figure out what it means for your business, what steps you need to take and how you’re going to deal with the changes.

Many business owners and entrepreneurs are still in “wait and see” mode. That could be a mistake if you end up overpaying for existing coverage, or want to get first time coverage and face health expenses before getting your coverage in place.

Details Unfolding

Details of healthcare reform are starting to unfold. The U.S. Small Business Administration, for example, has launched a new website ( and blog ( devoted exclusively to explaining it for small business. And while the SBA’s take on ACA is certainly biased to the upside, this new resource does offer a helpful gateway to information about how it will work.

Keep an eye out for something called the Small Business Health Options Program or SHOP. This program, launching in October, is designed as a (relatively) hassle-free way for you to find health insurance. If it works as promised, you’ll be able to choose the coverage level you want, what portion of employee costs you want to pay and tap available tax credits. You can sign up to receive email updates about SHOP at the website.

Starting in 2014, you or your small business can also get insurance through a new type of non-profit, consumer-run health insurer called a Consumer Operated and Oriented Plan (CO-OP). As with other co-op setups, these insurers will be run by their small business and self-employed customers themselves. Such CO-OPs are meant to offer consumer-friendly, affordable health insurance options to small businesses and must meet the same state and federal quality and financial standards as other plans. You can find more at the website.

Here are some key provisions based on the size business you are, from self-employed to 50+ employees.


Health insurance coverage for the self-employed will be in place and available through a new competitive health insurance marketplace in each state no later than January 1, 2014, with open enrollment starting October 1, 2013. You’ll be able to choose from four levels of coverage that pay different percentages of your costs.

Under 25 and Under 50 Employees

One provision already in place is a tax credit (way better than a simple deduction) for small businesses with fewer than 25 employees that pay a portion of employee health premiums and meet other criteria. Right now, the credit maximum is 35% of what you pay for coverage and that will go to 50% in 2014.

Small Business Majority, an advocacy group for small business, has a handy Health Care Tax Credit calculator on it’s website. You’ll see it on the right side of the homepage at:

Also starting in 2014, businesses with fewer than 50 employees can use the SHOP system to secure coverage. The assumption is that competitive pricing and pooled purchasing will lower costs significantly, although that’s yet to be seen.  Right now, small businesses pay about 18% more on average than big companies for equivalent coverage.

50 or More Employees

This is where mandates kick in. Starting in 2014, businesses with more than 50 full-time (defined as working 30 or more hours weekly) employees must offer health insurance or pay an “assessment.” The details of this “Employer Shared Responsibility” and other ACA tax provisions are available on the IRS website at See Affordable Care Act Tax Provisions under “Hot Topics.”

Starting in 2016, businesses with up to 100 employees will be able to buy health coverage through SHOP.

Here three other helpful features available on the website:

  • Timeline for implementation: What you need to do and when.
  • State-by-state breakdown of new healthcare options for small businesses.
  • A glossary of healthcare act terminology.

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5 New Keys to Cutting Small Business Health Insurance Costs

Health insurance remains as expensive, confusing and out-of-reach for most small businesses as ever.  If your business already has a health insurance plan, you probably know that costs keep rising.  And if you don’t, all of the talk about health insurance reform so far has probably only made your business even more befuddled.  And now this: A new survey by shows that less than 20% of business owners believe they’d find better benefits if they shopped for health insurance this year.

 But hidden in the health insurance fog are some valuable benefits and cost-saving opportunities – plus potential pitfalls you should know about.  Basically, small business owners who haven’t boned up on the latest changes could miss out on important chances to save money. Recent changes now in effect can help you get better benefits for little or no additional cost, including free preventive care screenings. There are also big-dollar tax breaks that can benefit some businesses with existing plans (see Claim your Small Business Health Insurance Tax Credit).

And here’s something else you should know:   Insurers in many states are looking to attract more small businesses and have started offering lower rates to new customers, which means your business may be able to save money by switching carriers this year.  Here are five key to getting the most from your small business health insurance right now:  

  1. Take advantage of recent changes: In addition to new small business tax breaks, health reform has mandated new benefits in plans now being offered that include preventive care screenings at no cost, and no lifetime limits on your health coverage.  But watch out:  If your business bought health insurance before reform passed in March 2010, your plan is probably “grandfathered” under the old rules and won’t provide the new benefits.  While the new benefits won’t lower your premiums, they don¹t seem to have increased prices for small group plans either.  And free screenings might head offer bigger health problems later, saving your business money in the long-run.  Plus, small business owners no longer have to worry about one employee’s illness maxing out the coverage on the entire plan.
  2. Customize benefits to costs:  Ask employees what benefits they really need and want, and construct a health plans that gives them only the benefits they are willing to help pay for.  (Always keep in mind, however, that it¹s illegal to ask employees to provide specific information about their health history or what kinds of benefits they use most.)  But, you can find out if they¹re interested in chiropractic care or dental insurance – benefits they could pay for on their own. You might also create an anonymous survey to find out what benefits they value most, or if they¹d prefer higher monthly premiums with low deductibles, or vice-versa.  
  3. Share the costs:  Consider the possibility of having employees contribute to monthly premiums, especially if they want broader benefits.  According to the eHealthInsurance survey, many small employers are still unaware that they can have employees share the cost of monthly premiums.
  4. Investigate new health coverage options:  More and more small business owners are exploring plans that include Health Savings Accounts (HSAs) and Flex Spending Accounts (FSAs).  Such plans often come with higher deductibles, however, which many employees fear.  Under many new plan designs, it is now easier for employers to contribute to an employee’s HSA account and eliminate that fear of a high-deductible, while still saving money.
  5. Shop for different insurers:  It’s tempting for time-pressed small business owners to shop once for a plan and move on.  And some business owners stay with a long-time insurance provider on the mistaken assumption that their favorite doctor or hospital only accepts the plan they have. But it’s a good idea to re-shop for coverage every two or three years to be sure you¹re still getting the best deal.  Big companies switch all the time to save money, and you should too. 

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Claim Your Small Business Health Care Tax Credit

If you’re a small employer with a health insurance plan and pay at least half of employee premiums, you probably qualify for a new health care tax credit worth thousands or even tens of thousands of dollars.  Contrary to rumors and media reports, most small businesses do in fact qualify for substantial tax credits, and SBA Administrator Karen Mills issued a letter today saying just that.

Generally, tax credits are available for small business owners who:

  • Started or continued health insurance coverage for employees in 2010
  • Contribute at least 50% of employee premiums at the single coverage rate
  • Have fewer than 25 full-time employees (part-time employees are counted proportionately)
  • Pay their employees an average of less than $50,000

The IRS has a simple three-step worksheet (at to help determine your eligibility.

Here’s an example.  An auto repair shop with 10 employees whose earnings average $25,000 can get what amounts to a 35% “rebate” on its health insurance premiums. Based on typical costs, that would be a credit of $24,500, according to IRS estimates. Not bad. And that’s a credit – which directly lowers your tax dollar-for-dollar – not merely a deduction.

Here’s what you need to know…

Because the eligibility formula is based in part on the number of FTEs, not the number of employees, employers that have more than 25 individual workers may also qualify if some workers are part-time. For eligible businesses the credit could provide a welcome boost.  Here are the four key health care credit eligibility standards:

1)    Your business provides and pays for health coverage. To clear the first hurdle, you must cover at least half of the cost of health care coverage for your employees.

2)    Your business is small. You cannot have more than the equivalent of 25 full-time workers. Eight half-time employees count as four “full-time equivalent” (FTE) workers. Thus, an employer with fewer than 50 half-time workers can still qualify.

3)    Your wages aren’t too generous. A qualifying employer must pay average annual wages below $50,000 to get even a partial credit.  For the full credit, the average must be under $25,000.

4)    Both taxable (for-profit) and tax-exempt (non-profit) firms qualify.

The credit is worth up to 35 percent of your premium costs in 2010 (25 percent for non-profits). In 2014 that jumps to 50 percent (35 percent for non-profits).  A ruling just issued by the IRS also confirms that the credit applies to premiums you pay for dental and vision coverage.  And your business can still qualify for the federal credit even if you receive a separate state credit.

Businesses with 10 or fewer workers and average annual wages less than $25,000 will qualify for the full credit. The credit starts to phase out as you move above those limits.  Businesses with average payrolls over $50,000 will not qualify for the credit at all.

Also be aware that if your business pays only a portion of health insurance premiums, with employees paying the rest, you can only count the premiums you pay when calculating the credit.

Another example: Downtown Diner, a restaurant with 40 part-time employees (the equivalent of 20 full-time workers), pays total wages of $500,000, or an average of $25,000 per full-time equivalent worker. Health insurance premiums paid by the business this year total $240,000, and the business would qualify for a 2010 credit $28,000, after applying “phase-out” provisions.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011.

Small Business Tax Credit Calculator is a new web-based tool that computes precise (not estimates) small business health care reform tax credit calculations for filing actual small business tax returns based upon each state’s allowances and up-to-the-minute legal requirements.  As the regulations regarding the small business health care reform tax credit continue to evolve it is critical to have a calculator that updates with the changes as they occur.

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