Obamacare and Small Business

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e work with small businesses (SMBs) every day. We are one as well. We know SMB’s have a lot of questions regarding the Affordable Care Act (Obamacare) and how it will impact small businesses. To help the businesses that drive our
economy, we’ve put together a comprehensive guide on Obamacare. We’ve attempted to do so in an apolitical way so
that small business owners can get the facts they need to plan for the implementation of the law regardless of political
leanings. So if you’re a small business owner looking for information on Obamacare including its facts, pros and cons,
summary or text, calculator, penalties, history, resources and more, you’ve come to the right place! Last updated
August 2013

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While it’s widely talked about and
endlessly debated by politicians and
talking heads, many people, including small
business owners, aren’t entirely
sure what Obamacare or the ACA is and
what it exactly entails. So in layman’s terms,
here’s a quick definition and some of the
basics of Obamacare:

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The Patient Protection and Affordable
Care Act (PPACA), more popularly known
as Obamacare or the Affordable Care Act,
is President Obama’s signature policy
achievement to date. It was signed into
law on March 23, 2010. It is the most
significant change to the U.S. healthcare
system since Medicare and Medicaid
passed almost 50 years ago.

Its stated primary purpose is to extend health
coverage to uninsured Americans and reduce the
future health insurance cost curve. To achieve
this purpose, the ACA has built in subsidies, tax
credits, penalties, and mandates. The bill itself
has ardent critics and supporters on both sides
of the political spectrum. One of the most
debated provisions is the “individual mandate”
that specifies that everyone must be covered by
health insurance or pay a tax with only a couple
of exceptions.

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Individuals and some SMBs meeting specific
requirements will be able to get subsidies if they
purchase insurance coverage in government-run health
insurance exchanges that have yet to be rolled out.
These exchanges may be run in each state; however, if
any state refuses to enact an exchange, the Federal
Government will force that state to be enrolled in a
federal exchange. An exchange is a marketplace where
individuals and SMBs (known for SMBs as “Small
Business Health Options Program” – SHOP) can
compare and buy policies. Like everything else, the cost
and funding aspects of Obamacare are vehemently
debated but in theory, it is funded by a variety of taxes
and cost savings.

Taxes for funding the bill include everything
from the Medicare tax rate, health insurance providers,
medical devices, premium tax increases and even taxes
from such services as tanning. Spending offsets include
projected savings in the Medicare program and home
health care payments.

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• SMB Owners will have to offer “affordable” health
insurance regardless of pre-existing conditions and
gender to all “benefit eligible” employees. This applies
to SMBs who employ more than 50 full-time or full-time
equivalent (known as FTEs or employees who work more
than 30 hours a week) employees. Employers under the
50 FTE threshold are not required to offer benefits.

• Firms with more than 50 employees or FTEs not offering
health insurance will be penalized after January 1, 2015.

erhaps the most important potential effect
of the passage and continued implementation
of Obamacare is that on small businesses.
Small businesses undoubtedly are a key cog in
the U.S. economy and there is no doubt small
business behavior will be changed due to key
provisions within the healthcare law, such as:

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hile this impact, and whether it will be positive or negative for the U.S. economy as a whole, is still widely
debated, there is little doubt that it will directly change small business behavior in several ways. Most notably
the impact could play out in various areas of a small business such as hiring and staffing, benefit packages,
and even financial projections as employers grapple with uncertain costs based on the requirements of the
law. These changes, scenarios, and cost considerations for small businesses are covered more in depth in the
Obamacare and Small Business section.

PROS AND CONS - LEFT VS. RIGHT:

erhaps the most difficult part of
understanding Affordable Care Act is wading
through the partisan arguments for and against
the law. Both sides having talked endlessly
about the pros and cons of the law, not to
mention the fact that individuals, businesses,
and every other party with a vested interest
have spoken up to detail what they believe will
be the benefits or drawbacks of Obamacare.
At the end of the day it leaves individuals and
small business owners alike asking the question:
How will Obamacare affect me? To make it as
clear as possible, we’ve briefly summarized
the primary pros and cons (in some cases
theoretical since they’re still debated both
ways) as put forth by both sides.

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SMALL BUSIHealth care coverage extended to
adults 18 years and older with
preexisting conditions and regardless
of sex as of January 2014.

Children can remain on their parents’
plan until the age of 26 regardless of
being enrolled in higher education or
marital status.

Individual mandate means that more
people are covered by health insurance –
including employers offering insurance to
all of their employees.

Health care law will lead to expanded
Medicaid coverage.

Subsidies will be provided to help
low-income people buy insurance.
Provide more cosumer options.

Establish better consumer protections by providing
protection against previous factors that affected
prices including: family size, age, geographic location,
and tobacco usage.

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Reduces freedoms and
employers’ flexibility and
benefit designs.

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SMALL BUSIThe individual mandate that requires
that citizens buy insurance is
unconstitutional. Those on the right
view it as a form of socialism where
the wealthy and/or healthy are
required to subsidize health care
costs of others against their will.

Enforcement mechanisms of the
individual mandate won’t work;
e.g., citizens will simply pay a
penalty rather than buy insurance
and drive up costs or simply find
new loopholes in the law.

Government regulation in health care will
lead to higher costs as a whole, since
government regulation is argued to ruin a
free-market system.

Higher taxes on health insurers
will be passed onto individuals
and companies buying in the
“fully insured” market. This will
lead to higher costs and kill small
businesses.

Increases spending and costs when the
government is already significantly in debt.

It will hurt the economy through lower
job creation due to increased hiring
costs as a result of uncertainty.

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of small business owners
said they were not familiar
with health insurance
exchanges and how they
could impact their business.

of Small Employers
(less than 50 employees) understand the
employer mandate.

either incorrectly believed
or were not sure whether
they would be required to
pay a tax for not providing
health insurance in 2014.

of small employers are
most concerned about
the cost and budgetary
implications of health
care reform.

said understanding
the impact on their
businesses was their
biggest concern.

SNOW
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he Affordable Care Act has already lived a full life in its short existence. Democrats and those who
support the bill have pushed hard to get it signed into law, while Republicans and those who reject it having
fought it every step of the way to repeal Obamacare by fighting it as an unconstitutional law. The timeline of
Obamacare below shows a brief history of some of the most significant events and important dates of the law
known as the Affordable Care Act.

President Barrack Obama signs into law the
Patient Protection and Affordable Care Act
(PPACA). Implementation of the law begins with
some grandfather clause exemptions for some
policies, but in many cases provisions of the law
begin to affect current policies. The law begins to
roll out over the next four years, with most of the
actual changes to the healthcare system beginning
in 2014.
After legal challenges and lots of rhetoric from a
broad range of groups and states, the Supreme
Court rules that the ACA is constitutional in the
case National Federation of Independent Business
vs. Sebelius.

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Employers are required to provide print
notification of employees’ ability to shop for a plan
in state-run exchanges. This was deadline was
originally March 2013 but it has been pushed back
to October 1, 2013 for current
employees. After this date, employers are
required to provide notice within fourteen days of
hiring. The Department of Labor has yet to give an
example notice.

Open Enrollment Begins for individuals and small
businesses to buy health plans in the insurance
marketplace. Federal and State Health Exchanges
scheduled to open. These markets will feature the
“individual health insurance market” and “small
group market” to cater to individuals and small
employers, respectively. A large group market for
employers with more than 100 employees won’t be
available until 2017.

JANUARY 2014

Many aspects of the law become effective starting
January 2014. These include
government subsidization of individuals up to
400% of the federal poverty line, the individual
mandate, health insurance tax (HIT) to be levied
on insurers, prohibition of annual limits on group
health plans, etc.

JANUARY 2015

Employers with greater than 50 FTE employees
must offer insurance or face penalty.

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impact of Obamacare being implemented is
small business owners and employers. This
is because small businesses traditionally not
only help drive the U.S. economy, but also
operate on small budgets. As a result, they
need to control costs and thrive in stable
environments that keep cash flow stable.
Now that the question, “When does
Obamacare start?” has been answered, listed
below are the requirements you need to know
if you’re a small business owner.

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Employers with greater
than 50 full-time or full-time
equivalent employees must
provide insurance or face a
penalty. This is known as
shared responsibility.

than 50 full time or full-time

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than 50 full time or full-time

hours per week is
considered full time

THIS MEANS that
50 employees working
30 hours is the same as
100 employees working
15 hours. This applies to
owners who own multiple
businesses, as employees’
hours aggregate
across businesses.

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Penalties will be faced
when at least one of your
employees receives a federal
subsidy to buy insurance on
a state health exchange.
Employers who do not offer
health benefits are exempt for
the first 30 employees and
face a $2000-a-head penalty
for the rest. Penalties
are not tax deductible.

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Impact Obamacare on Small Businesses
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plan costs more than
9.5% of the employees’
income and the employee
chooses a subsidy in
exchange, then the penalty
is $3000 per employee.

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Employers with less
than 50 employees
will be able to shop
for insurance in the
government exchanges
and are not required
to provide insurance.

Employers with less than 25 employees will have opportunities for tax credits
depending partially on the average salary of the employees and if the employer
provides health insurance. This is noted as average annual wages of less than
$50,000. Employers must also pay at least half of employee health insurance
premiums. This credit may be worth up to 35% of what the employer contributes
towards the premiums of the employee. This increases to 50% in 2014, but is
eventually phased out.

In states participating in the Medicaid expansion
state employers are not required to provide
coverage to low-wage employees who qualify
for coverage from Medicaid. Non-Medicaid
expansion state employers may still have
to provide coverage to these employees.

Employers must provide a
Notice of Summary of Benefits
and Coverage. This notice clearly
explains to employees their options
regarding benefits and coverage.

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Employers must provide written
notice of the availability of the
government-run health exchanges.
This must be done by October 1, 2013.
Open enrollment opens October 1, 2013.

New plans offered as of 2014
must include a set of “essential
health benefits” that are sometimes
excluded from current coverage.
Examples of these “essential benefits”
include emergency services, hospital
stays, mental health and abuse services,
prescription drugs, preventative care,
and maternity and newborn care.

Businesses must supply employees with a summary
of benefits coverage, as well as report on workers’
W-2 forms the cost of company-sponsored health
coverage for the previous year. This is required
of employers producing 250 or more W-2s.

Employees are not allowed to contribute
more than $2500 to pretax health flexible
spending accounts. This will be adjusted
for inflation in future years.

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OBAMACARE / AFFORDABLE CARE
ACT SUMMARY, PDF AND TEXT

• Patient Protection and Affordable Care Act –
An extremely comprehensive resource for all
aspects of the law from Wikipedia.

• Official Patient Protection and Affordable Care Act –
AKA Obamacare - Text and PDF
• Summary of Affordable Care Act / Obamacare:
Quick Summary of Obamacare (CBS),
Obamacarefacts.com, About.com,
Kaiser Family Foundation – PDF, Senate.gov PDF

OBAMACARE / AFFORDABLE
CARE ACT TIMELINE

• Interactive Timeline of Changes and
–Full Timeline of Key Features – Health
reform timelines from Healthcare.gov

• Timeline – U.S. Chamber of Commerce

WEBSITES DEDICATED TO
HEALTH REFORM LAW / OBAMACARE

• Kaiser Family Foundation Health Reform excellent resource for Obamacare information that
includes timeline, calculator and much more.
• Obamacare – Independent site full of information.

OFFICIAL OBAMACARE HEALTH REFORM WEBSITES
• Small Business Section and
Small Business Obamacare FAQ – Healthcare.gov

• Department of Labor Health Reform for Small Businesses –
Official documents and resources for
small businesses for the Affordable Care Act.

• U.S. Chamber of Commerce Health Reform Law 101 For Businesses –
This section includes an Added Costs Table, List of Taxes,

Eliminations of Deductions and New Fees, FAQ and much more.

OBAMACARE / AFFORDABLE CARE ACT TOOLS
– CALCULATOR, FLOW CHARTS, TAX CHARTS

• Tax Penalty Chart For Small Businesses from the
National Federation of Independent Business.
• Small Business Health Care Tax Credit for Small Employers –
For employers under 25 employees
and meeting the other requirements.
• Coverage and/or Penalty? -- Great flow chart by U.S.
Chamber of Commerce to help ascertain whether small
businesses need to offer coverage or pay a penalty.
• Employer Penalty Calculator –
Penalty calculator from U.S. Chamber of Commerce.

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Disclaimer: We’re not legal
experts nor healthcare policy
wonks. We’ve done our best to
provide accurate and unbiased
information but will not be held
liable for any misinformation.

SNOW
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Obamacare and Small Business

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