Small financial advisory firms looking to provide medical insurance to their employees will have new options for next year, including public small-business exchanges set up by the Patient Protection and Affordable Care Act.
Companies with fewer than 25 employees that join the Small Business Health Options Program have the added benefit of up to a 50% tax credit in 2014, Meredith Olafson, senior policy adviser at the Small Business Administration, said during a webinar today.
Firms can begin to sign up for 2014 coverage through the SHOP exchanges in October.
SHOP exchanges were created to make health insurance less expensive for small businesses that usually can't access as many plans as larger companies and typically have to pay higher premiums. The exchanges also help employers off-load the administrative burden of offering health insurance to their employees.
“The exchanges aim to spur competition for customers based on price and quality, rather than by avoiding risk,” Ms. Olafson said.
The SHOP exchanges, some of which are run by the states and others that are run by the federal government, may only offer a single plan in 2014 because of technical problems setting up the program, Ms. Olafson said. Employers should have multiple plan options in 2015, she said.
To qualify for the tax credit, average annual wages must be $50,000 or less and the employer must contribute at least half of the self-only premiums for their employees. The average wage calculation does not include the owner, a partner or family members, Ms. Olafson said. Guidance on calculating average wages and number of eligible employees can be found at IRS.gov/ACA.
A similar health care tax credit of up to 35% has been available to business owners since 2010 and about 360,000 firms took advantage of it in 2011, according to the SBA.
Advisers and other small businesses also can consider private exchanges that offer other services, such as a dental plan. However, those employers won't qualify for the tax credit.
The ACA requires companies that have 51 or more employees insure their workers or face a $2,000 per employee fine beginning in 2015. However, many smaller firms feel pressure to offer insurance because their employees will be subject to the health care act's mandate that individuals have their own policies if they don't qualify for Medicaid.
Penalties for each individual without coverage start at $95 in 2014, or up to $285 per family. They are set to rise in later years.