The recent ruling upholding the Affordable Health Care Act sets in place several realities. Businesses that were waiting to see if the act would be ruled unconstitutional must now plan to adjust. There is a lot of talk about a repeal of the act. However, experience demonstrates that few laws are repealed. We may see some nibbling at the edges of the plan, but we need to accept and respond to its new reality.
A one-person business would be treated like an individual. While there are some exemptions, failure to buy an insurance policy will result in a fine of $695 or 2% of your income, whatever is higher. While I am not a CPA, my understanding is this would apply to those running home-based businesses.
Businesses with less than 25 employees receive a tax credit up to 35% of the cost of insurance depending on the average salary of employees. Under the healthcare act, this tax credit will be phased out after 2016.
Larger firms employing 50 or more full time equivalent people will pay a fine of $2,000 per employee. A company employing a few full time workers but a lot of part timers may run into this penalty provision.
Any insurance policy must meet government standards to exempt the employer from paying the penalty. In addition, insurance premiums will be subject to an additional tax, increasing the cost to many.
Going forward, each business must start thinking through what steps to take. Essentially, businesses will have one of two choices: provide insurance to employees or pay the penalty. In many cases a business may elect to drop coverage, pay the fine, and transfer employees to public insurance plans. Businesses will need to balance a decision to drop coverage with their employees’ reaction.
King Solomon wrote, “The wise are cautious and avoid danger; fools plunge ahead with reckless confidence.” (Proverbs 14:16, NLT) Ignoring implications of the new healthcare law is foolish. Waiting and doing nothing or hoping for repeal is also unwise. Take steps to understand what this new law means for you and your business. Then, make sound decisions that will protect your business from unnecessary penalty.
Steve Marr, Your Christian Business Coach