Health Care

Health Care Reform and Your Business

How the New Law Will Impact Your Bottom Line
Now that health care reform legislation with a true price tag of nearly $2 trillion is the law of the land, many small business owners are asking how they will be impacted. The answer is to expect higher costs and more mandates.

Mandates
The new law forces small businesses to provide health insurance whether or not they can afford it. Beginning in 2014, employers with more than 50 employees will be required to offer coverage or pay a $2,000 fine per employee if just one employee receives a subsidy to purchase insurance through newly created state health insurance exchanges. A firm’s first 30 employees will be subtracted from this penalty payment calculation.

Even businesses with more than 50 employees that do offer health benefits will face a $3,000 fine for each full-time employee who opts out and receives a subsidy to purchase coverage through an exchange. Part-time employees are taken into account as full-time equivalents, defined as working 30 hours per week. The total employer penalty is capped at the maximum penalty amount it would face if it did not offer any coverage at all. An employer plan must cover a specific set of services to be determined by the government and meet actuarial standards laid out in the law.

It is estimated that nearly 220,000 small businesses employing more than 26 million workers could be subject to the employer mandate. As premiums rise, some businesses will decide that it makes sense to drop coverage and pay the fine. The Joint Committee on Taxation estimates that employers will pay $52 billion over 10 years in penalties for noncompliance. The Congressional Budget Office (CBO) projects that 3 million fewer Americans will be covered through employer plans in 2019.