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Health care for small-business owners: Some ABCs of the ACA

3 min read

Small Business


Understanding the ins and outs of the Affordable Care Act is a formidable task, and we’re all learning as we go. But the basics of health care for small-business owners are actually pretty straightforward.

Here are a few things you should know:

On Jan. 1, 2015, the ACA employer mandate kicks in. For employees to be covered by Jan. 1, they must be enrolled by Dec. 15, but new employees can be added throughout the year.

  • Businesses with 100 or more full-time or full-time equivalent employees will be required to provide health insurance to at least 70% of those employees. (A full-time employee is anyone who works at least an average of 30 hours a week. Two people working a combined 30 hours are considered a full-time equivalent.) The annual penalty for not providing insurance will be $2,000 for every employee after the first 30.
  • Businesses with 50 to 99 full-time or full-time equivalent employees have until the following year before they’ll be penalized
  • Businesses with fewer than 50 employees remain exempt. The Department of Treasury does offer some transitional relief for tax-year 2014.
  • Businesses with 25 or fewer employees can qualify for the Small Business Health Care Tax Credit is available to businesses if they pay an average wage of less than $50,000 and cover at least half of employee health insurance premiums. To be eligible, an employer must pay premiums for employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace or qualify for an exception. The credit is available for two consecutive years. For tax year 2014, the maximum credit is 50% for small businesses and 35% for small tax-exempt businesses.

The SHOP Marketplace is intended to help small businesses provide health coverage to their employees and is open to those with 50 or fewer employees. Businesses with 50 or fewer employees — except in Vermont and Washington, D.C. — can purchase health plans either directly from an insurance provider or through a federal- or state-run SHOP.

In 2015, some states will allow employers to offer a selection of plans to their employees. To find out if your business is in one of those states, visit

Also new for 2015 is a requirement that businesses with 50 or more full-time or full-time equivalent employees submit an annual report on the healthcare coverage they’re providing. Employers must also now inform their employees of their health care options and provide a “Summary of Benefits and Coverage.”

And another important piece of information: The U.S. Small Business Administration reminds owners that the Affordable Care Act stipulates that insurance companies must spend at least 80 percent of premium dollars on medical care. Those who don’t do so are required to provide rebates to their policyholders. And you, the recipient, are required to determine whether the rebate is a “plan asset” (If it is, you have to allocate it to plan members). This is tricky, so check with your CPA.

Understanding the ins and outs of offering healthcare for small business employees can be confusing, so check with your attorney or CPA if you have questions. The SBA also offers a lot of good information for small businesses about health care on its website.