Weighing in at 1990 pages long, the Affordable Care Act (“ACA”) is an understandably complex piece of legislation, major components of which may be difficult to wade through. The goal of this article is to inform New Hampshire small-business owners employing under 25 full-time employees of several key provisions of the ACA.
In the area of taxes, the ACA offers a “Small Business Health Care Tax Credit.” This tax credit is meant to enable employers to provide health insurance to their full-time employees. To be entitled to the credit, the business must: (1) have fewer than 25 employees; (2) pay an average annual wage under $50,000; and (3) contribute 50% or more toward their employees’ health insurance premiums. The benefit is a tax credit of up to 35% on the contributions paid. For example, a business that pays $100,000 in qualifying contributions would potentially be entitled to a $35,000 tax credit.
Small businesses will also be able to participate in the Small Business Health Options Program (“SHOP”). Small businesses, by virtue of their size, typically are charged more for health insurance than larger businesses. Starting in 2014, SHOP allows small businesses to join together in a government-established market to pool their risk and obtain a better rate. New Hampshire is currently enrolled in the SHOP program, meaning that a New Hampshire small business can participate in the SHOP program if they offer coverage to all full-time employees. For those employers looking to take part in SHOP as of 2014, go to www.Healthcare.gov.
The ACA also imposes a notification requirement upon businesses bringing in at least $500,000 in business a year. These businesses have to notify their employee(s) about the state provided marketplace where the employees can purchase their own insurance, aka the Exchange. Employers must also notify them that by purchasing insurance from the Exchange, they are entitled to a tax credit but can lose their employer contribution. This notice must be provided to employees by October 1, 2013 regardless of full-time status. The federal government is currently providing an Exchange for New Hampshire employees. A state-based Exchange program is currently being examined by a state advisory board.
Those businesses offering dependent coverage must extend that coverage to the workers’ adult children up to age 26. The ACA also prohibits exclusion periods for dependents with a pre-existing condition.
Beginning on January 1, 2014, employers that provide health insurance to their employees can no longer require them to wait more than 90 days to begin coverage. The waiting period for the purposes of the ACA begins once the employer becomes eligible for insurance. An example provided by the IRS states:
Employer X’s group health plan limits eligibility for coverage to full-time employees. Coverage becomes effective on the first day of the calendar month following the date the employee becomes eligible. Employee B begins working full time for Employer X on April 11. Prior to this date, B worked part time for X. B enrolls in the plan and coverage is effective May 1.
Under this scenario, the period between April 11 (when the employee became full-time and eligible for benefits) and the actual providing of coverage on May 1 is the waiting period. Because it is under 90 days, it is a permissible waiting period under the ACA.
This is by no means a comprehensive guide to the ACA. Readers will find additional information at http://www.sba.gov/healthcare and may call Attorney Douglas Mansfield or Eric Maher with questions on this aspect of the ACA.