When Congress passed health care reform last spring, many small business owners were left wondering how the new rules would affect them.
To answer those questions, Washington, D.C.-based journalist David Nather has penned the book "The New Health Care System: Everything You Need to Know," which will be released in paperback this month. In it, he illustrates the new healthcare system’s potential to help – or hinder – small business owners trying to provide healthcare to their families and employees.
Nather told BusinessNewsDaily some of the ways in which small business owners should prepare for the upcoming changes in health care:
Consider a grandfather status
All health plans must provide certain benefits, but those that were in place on March 23, 2010 can be grandfathered into the new rules without changing coverage. Plans lose their grandfather status if they significantly cut benefits or raise out-of-pocket costs for members. This means that if you are happy with your existing health care plan , you do not need to change.
Apply for the small business tax credit
Businesses with up to ten full-time (or the equivalent of full-time) employees who make an average annual wage of less than $25,000 can get up to 35 percent of their health care costs reimbursed by the federal government starting in 2010. In 2014 the reimbursement rises to 50 percent per year until the credit ends two years later. Businesses with employees whose average annual wages are under $50,000 qualify for a partial tax credit, Nather said. Apply for the credit starting with your 2010 tax return.
Brush up on the rules that affect your employees .
This includes changes to the rules for flexible spending accounts and health savings account reimbursements. Employees will have to adhere to the new rules, which begin in 2011 and include higher penalties for using savings account money for the wrong things. Flexible spending accounts will be capped at $2,500.
Watch for Medicare tax increases
Medicare payroll taxes and the tax on unearned income will begin to affect small businesses in the next few years, Nather said. In 2013 the Medicare payroll tax will rise to 2.35 percent. The law also adds a new tax of 3.8 percent to individuals with incomes over $200,000, Since most small business owners pay their taxes as individuals, they’re likely to pay this tax. The tax will, for the first time, apply to non-wage income such as capital gains and interest.
Enroll in state health insurance program
Small businesses should also be sure to enroll in their state’s health insurance exchange program, Nather said. In 2014 the new exchanges are expected to allow small businesses to join insurance pools to spread their health risks more widely. The pools are meant to protect small business owners from large premium hikes if their employees get sick or hurt. Small businesses with up to 100 workers will be able to join these exchanges and, starting in 2017, states can expand them to larger employers.