4 key points small-business owners need to know about the ACA
The Affordable Care Act (ACA) has changed the landscape of healthcare coverage in the U.S. for employers both large and small. And that has many small business owners wondering, “what does this mean for me?”
Joe Donlan, senior vice president of Connecture, a health insurance exchange technology provider, says, “Employers need to start thinking about health coverage in a more holistic way, as just one part of their benefits portfolio.” He recommends that employers and employees look beyond the cost of the premium itself and consider such factors as out-of-pocket expenses, health savings accounts, and wellness programs.
If you’re a small business owner with up to 50 employees, here are 4 key provisions of the ACA that should matter to you and your employees.
1. The small business health care tax credit
This credit can benefit employers with fewer than 25 full-time equivalent employees, who pay an average wage of less than $50,000 a year, and pay at least half of employee health insurance premiums. To be eligible for the tax credit, an employer must have purchased coverage through the Small Business Health Options Program, also known as the SHOP Marketplace.
This tax estimator tool can help you determine if you qualify for the credit.
2. The 90-day waiting period
Coverage under a group health plan must be made available to eligible employees no later than 90 calendar days from an employee’s eligibility dare. The 90-day waiting period provision applies to employers of any size.
3. Limits on health savings account (HSA) contributions
An HSA is a tax-advantaged medical savings account that employees can draw money from, tax-free, for qualified medical expenses, including out-of-pocket copays and pre-deductible costs. (Note: HSAs can only be used with high deductible health plans.)
Employees deposit a specified amount of pre-tax money directly into their HSA through payroll deductions. Employers can contribute to the account as well, and benefit by reducing their Federal Insurance Contributions Act (FICA) tax with this strategy. But keep in mind employer plus employee contribution limits for 2017 are $3,400 for self-only, and $6,750 for family.*
4. Wellness programs are good for the health of your business, and employees
The ACA creates new incentives to promote workplace wellness programs and encourages opportunities to support a healthier workforce. Generally, these programs provide rewards to employees who meet certain health outcomes, or participate in wellness activities, such as smoking cessation classes.
For your business, wellness program participation can mean healthier employees that are more productive. According to the Centers for Disease Control and Prevention (CDC), wellness program participation can reduce healthcare costs, worker compensation expenses, disability management claims and absenteeism by 25% each.** For smaller companies, these savings can be funneled back into the business to help retain and attract new employees.
*Source: Miller, Stephen, CEBS; “IRS Sets 2017 HSA Contribution Limits,” Society for Human Resource Management www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-sets-2017-hsa-contribution-limits.aspx (link opens in new window) (accessed 10, Jan. 2017)
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