As a small business owner, you may have heard plenty of rumors and chatter about what Obamacare will mean for your bottom line. Small business owners are a major component of the American economy, and the success of small businesses depends on the extent of governmental regulations. Understanding the ways that Obamacare can financially affect a small business can help owners plan for the future, mitigate their liabilities and make changes to avoid penalties and other consequences of the law.
How Business Size Determines Obamacare Effects
The effects for small business employers depend on the size of their business. For business owners that employ fewer than 25 people, the owners can get a tax credit for up to 35 percent of the premiums of employee health insurance coverage plans. For employers with 25 to 49 employees, there are no federal requirements to provide health insurance coverage for staff, although the employers might miss out on tax credits and might have to deal with the rise in cost for health care coverage that is provided. For employers of 50 or more people, there will be a choice of either providing coverage for every employee or facing a penalty per employee for failing to do so.
The Healthcare Penalty
Beginning in 2014, employers with 50 or more employees will have to either sponsor a health insurance plan for 100 percent of their staff or pay a federal penalty of $750 per year per employee. For some businesses, paying the penalty could be less expensive than sponsoring health coverage for the staff. The employees in such a situation would be forced to participate in a state sponsored healthcare exchange program, which could result in more expensive and less extensive coverage than what they would receive through an employer based program.
Cost of Health Insurance Premiums
In addition to the potential for federal penalties for employers who elect not to participate in insurance coverage for their entire staff, employers might also face an increase in the cost of the premiums they do offer. Economic analysts suspect that healthcare companies will increase premium rates due to the increased competition they will face from the state sponsored healthcare exchanges and from the potential drop in business due to employers who elect to pay the penalty instead of purchasing the more expensive healthcare coverage for their employees.
The Obamacare program will affect healthcare coverage, costs and options for everyone. During the upcoming years, there will be many changes for small businesses to keep up on to avoid unpleasant surprises. As courts uphold the major components of the law, small business owners will need to do their due diligence in preparing for the changes ahead.