Health Insurance Marketplace for Small Businesses
The Affordable Care Act created an outlet for two primary groups to obtain coverage that were often left without it: individuals and small businesses. As small employers typically could not afford to purchase coverage for their workers before the law, the ACA established the Small Business Health Options Program (SHOP).
Through this section of the health insurance marketplace, companies with up to 50 workers could possibly manage to insure their full-time workers with affordable coverage. The smaller the business, the more you’ll save. Tax credits, like the ones issued to individuals and families on the exchange, are also issued to small businesses who meet certain criteria to reduce costs.
How to Use the SHOP
SHOP intends to make shopping for small group coverage simpler. Through the exchange site local to your state or the main portal for the 30 states operated by the U.S. Department of Health and Human Services, HealthCare.gov, you can compare policies and rates.
To find out if your business is eligible for a Small Business Health Care Tax Credit, the marketplace websites and insurers are equipped can calculate your subsidy. You can also visit the IRS website, the agency responsible for issuing tax credits.
You may find it’s more economical to have your workers purchase coverage on their own, or that it will be a good investment if you have the right combination of employees and revenue.
You can also purchase SHOP plans from a licensed agent who can sell exchange plans. At East Coast Health Insurance, our agents are licensed and certified to quote for plans on or off the exchange. Call us at 888 803 5917 to speak with a live agent and find out more about your options.
Small Business Health Care Tax Credit
While the introduction of subsidies can be confusing, there are only a few things you need to know to understand how they work. Your insurer handles the more complicated part.
As a small business owner, you are entitled to financial assistance when you buy an exchange plan for your workers if you have up to 25 full-time equivalent employees who earn about $50,000 per year on average or less. You must also pay a contribution of at least 50 percent for your workers’ premiums. As mentioned, employers can purchase insurance anywhere they like, but they can only receive tax credits through the exchange.
How Subsidies Work for Small Businesses
The fewer employees you have and the less they earn, the more you’ll save on coverage. Employers qualify for higher tax credits when they have less than 10 workers who get paid up to $25,000 per year, or $250,000 total.
The highest tax credit you can receive is 50 percent off of your premium contribution, or up to 35 percent off if you are a tax-exempt business.
For example, if you run a family-owned garden shop with 7 full-time employees who each earn about $2,083 per month ($25,000 per year), and you decide to offer coverage through SHOP. You agree to pay $50,000 in premiums, so the tax credit will cover $25,000, or 50 percent, because you have so few employees who earn so little.
Tax credits are issued by the Internal Revenue Service (IRS), and you must complete one a form from the IRS in order to calculate your credit amount and attach it to your tax return, beginning in 2015 for tax year 2014.
To find out if you qualify for the SHOP marketplace or tax credits, you can also call us at 888 803 5917.