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The Affordable Care Act: What Small Businesses and Nonprofits Need to Know

The Affordable Care Act: What Small Businesses and Nonprofits Need to Know. Snapshot of Small Businesses. Overwhelming majority of US businesses have less than 20 employees; many of these businesses include the self-employed

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The Affordable Care Act: What Small Businesses and Nonprofits Need to Know

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  1. The Affordable Care Act: What Small Businesses and Nonprofits Need to Know

  2. Snapshot of Small Businesses • Overwhelming majority of US businesses have less than 20 employees; many of these businesses include the self-employed • Smallest businesses struggle to pay for and/or provide employer-sponsored insurance • Less purchasing and negotiating power • Little to no HR resources • Unpredictable increases in health care costs from year to year

  3. Making Health Insurance More Affordable: Tax Credits • Tax credits currently available • Small businesses or nonprofits with 25 or fewer full-time employee equivalents • Pay average annual wages of less than $50,000/employee • Provides and covers a portion of the cost of employees' health insurance • Credit of up to 35% for small businesses and 25% for nonprofits; goes up to 50% for small businesses and 35% for nonprofits in 2014 • Visit http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers for more information

  4. Making Health Insurance More Affordable: Market Reforms • In 2014, health insurance pricing limited to geography, age (limited at 3:1), and tobacco use • Gender and health status can no longer be used to set price • New and non-grandfathered plans are required to spend at least 80% of premium dollars collected on health care costs; must provide refunds if this minimum is not met • Annual review of premium rate increases, and if above 10%, must be justified; information can be used by Exchanges to determine plan participation

  5. Simplifying the Health Insurance Selection Process • Small Business Health Options Program, or SHOP Marketplace • For small businesses with less than 50 employees and self-employed individuals • Requires information to be offered in an easily comparable and understandable manner – “apples to apples” • Participating health insurance plans must meet minimum standards and offer comprehensive benefits

  6. Simplifying the Health Insurance Selection Process (cont’d) • Streamlines access to tax credit for small businesses and nonprofits • Starting in 2017, states may merge individual Exchange and SHOP and/or allow larger businesses to use SHOP

  7. Shared Responsibility Provisions for Small Businesses and Nonprofits • Some businesses will be required to provide affordable, minimum-level health insurance coverage to their employees • Businesses with 50 full-time equivalents (FTEs), or fewer, are exempt from this provision and are not penalized even if their employees access a tax credit on their own • FTEs are defined as someone working 30 hours or more/week • Businesses with more than 50 FTEs could face a Shared Responsibility Payment, depending on whether the employer offers insurance, if at least one FTE accesses a tax credit or cost-sharing reduction on his/her own

  8. Shared Responsibility Provisions for Small Businesses and Nonprofits (cont’d) • For businesses with >50 FTEs that DO NOT offer insurance, there is a penalty of $2,000/employee, not counting the first 30 employees • E.g. A business in this situation with 55 FTEs would have to pay $2,000/employee * 25 employees (55 minus 30) = $50,000 • E.g. A business in this situation with 65 employees would have to pay $2,000/employee * 35 employees (65 minus 30) = $70,000

  9. Shared Responsibility Provisions for Small Businesses and Nonprofits (cont’d) • For businesses with >50 FTEs that DO offer health insurance, there is a penalty of either $3,000/employee who accesses a tax credit OR $2,000/employee, not counting the first 30 employees, whichever amount is less • E.g. One employee accesses a tax credit on his/her own; the business would have to pay a $3,000 penalty • Coverage offered must meet “minimum essential standards” and must not beinadequate or unaffordable • Inadequate is when the plan offered covers less than 60% of the total allowed cost of benefits • Unaffordable is when the plan costs more than 9.5% of the employee's household income

  10. Health Insurance Landscape in 2014 • New options for coverage • Opportunity to shop on the competitive health insurance marketplace • Tax credits – for those with incomes up to 400% FPL (~$92,000/year for a family of four) • New Medicaid limits to cover newly eligible - 138% FPL (~$20,000/year for family of two) • 1.6M Illinois residents will have access to affordable coverage • Over 1M will be eligible to use the Exchange • 340,000+ eligible for new Medicaid

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