It’s Not Too Early to Plan for How Health Insurance Reform Will Affect Your Small Business

By Karen Axelton

In the recent Armageddon-themed thriller starring John Cusack, “2012″ is the year to fear, but when it comes to health insurance reform, 2014 is the big date that small business owners need to be wary of. Why? Because that’s when the “pay or play” aspect of the Patient Protection and Affordable Care Act will take effect.

Pay or play means that business owners have to choose between offering their employees health insurance (play) or paying a fine—in most cases, $2,000 annually for each full-time employee or equivalent. (The fines don’t kick in until you have more than 30 full-time workers.) And while 2014 may seem so far away that you don’t need to worry just yet, as CFO Magazine points out, the time to start planning is now.

For one thing, when you’re considering your health coverage for the year 2014, you’ll need to be negotiating that with your provider in 2013. More importantly, the equation to consider isn’t a straight tradeoff between the cost of premiums vs. the $2,000 fine. There are many other costs and benefits to consider, including:

• The tax deduction you receive for the employer-paid portion of health-care costs
• Increased FICA and workers’ comp taxes (because if health-insurance premiums aren’t deducted from workers’ paychecks, they’ll have more taxable income)
• The cost of coverage offered by state insurance exchanges (scheduled to be rolled out in 2014)
• How you could cut costs without eliminating coverage (perhaps by eliminating coverage for dependents or restricting what is offered)

Money isn’t the only factor in this decision. If you are in a competitive industry, cutting out coverage altogether may make it impossible to find qualified workers as they flee for big companies with better benefits. If your work force is mostly older employees who have valuable knowledge but more health issues, you may not want to reduce or eliminate coverage.

CFO notes that under one provision of the law, even companies with coverage could face fines if their coverage is deemed “poor quality.” With the presidential election coming up in 2012, it’s possible the rules and/or timetable for health care reform itself could change significantly. But it’s not too early to at least explore your options with your insurance provider and your accountant (and feel out some other providers at the same time).

Image by Flickr user toca boca (Creative Commons)

This entry was posted on Tuesday, August 2nd, 2011 at 6:00 am and is filed under Accounting and Taxes, Business Law, Compliance, Small Business, small business, Workforce. You can follow any responses to this entry through the RSS 2.0 feed.


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