Small Businesses Offered Rare Health Insurance Incentives

Small Businesses Offered Rare Health Insurance Incentives

Strictest Mandates Reserved for Mid-Size and Large Firms

Much attention has been focused on the fees and taxes that mid-size and large employers will face as the Patient Protection and Affordable Care Act begins to take effect over the next few years. However, many of the precious few incentives for employers in the health insurance legislation are targeted toward small business.

If you have 10 or fewer employees: Beginning in 2010 (through 2013), you may be able to receive a tax credit for up to 35% of your contribution toward employee health insurance premiums as long as your firm’s average annual wage does not exceed $25,000. This credit begins to phase out for firms that employ more workers or pay higher wages.

If you have 25 or fewer employees: Your firm may still be eligible for a reduced version of the tax credit described above, as long as its average annual wage is less than $50,000.

This credit is offered only through 2013. Beginning in 2014, qualifying small businesses that purchase insurance for their employees through a health insurance exchange program would be eligible for a tax credit of up to 50% of their contribution, but only for two years.

If you have fewer than 50 employees: Your company will probably be exempt from a nondeductible tax penalty levied on employers that do not provide health insurance. Beginning in 2014, larger firms that don’t offer “minimum essential coverage” face a $2,000 annual tax per employee (although the tax is calculated based on the number of employees in excess of a 30-employee exemption).

If you have 200 or fewer employees: Your firm is exempt from a 2014 requirement to enroll employees automatically in a health insurance plan. Employees will be able to opt out of the plan.

Although the health insurance legislation seeks to achieve its objectives mainly through mandates, penalties, fees, and taxes, small businesses are among the few entities that are offered incentives to provide health benefits to workers. Please call if you have questions about how the legislation could affect your business.