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Health Reform and Your Small Business


Exacerbated by the recent “Great Recession,” small business owners everywhere are not only facing lagging consumer and commercial spending and fewer credit options, but also high employee health care costs. While health benefits have been a goal for most employees seeking work, all across our great nation, mom and pop endeavors with even the most solid histories face tremendous financial obstacles in giving their employees the coverage they need. With lack of quality, low-cost health care options for employees being an exacerbating factor in many a recent businesses’ decisions to cut staff and sometimes, close shop, bankruptcy has been the only option for many a small company.

The recent health care legislation with amendments—nearly 2600 pages—leave many unsure of the implications for small businesses needing to employee coverage.

Here are a few fast facts for that can provide a health reform overview to the benefits for beleaguered business owners:

Employer’s Obligation to Provide Insurance

Generally speaking, the new health care legislation does not require an employer to provide insurance for any employee (though starting in 2014, large companies will pay a penalty if a full-time worker gets a public subsidy to buy insurance individually). Nor does it mandate that employers contribute anything toward their employees’ premiums. However, in order to take advantage of new small-business tax credits, a company must pay for at least half of the employees’ premium cost.

Penalties for Not Providing Insurance

With some exceptions, any penalties for not covering employees apply for a business with 50 or more full-time employees. These larger businesses must pay a penalty if at least one full-time employee requires a public subsidy for insurance. When an employee must find his own coverage because the business does not provide any options, the penalty is $2,000 for each full-time employee in the company, albeit with a 30-employee deduction. When the business does offer coverage but it is considered under the legislation to be “unaffordable,” the penalty is $3,000 for every employee taking a subsidy. This specific penalty is capped at the total penalty the company would pay if it did not offer insurance at all.

Small-Business Tax Credits

From 2010 through 2013 a smaller business will receive a tax credit to offset some 35 percent of its insurance costs, provided the business contributes at least half of their employees’ premiums. At the point, the business begins buying insurance through a health insurance exchange, the credit increases to 50 percent.

Health Insurance Exchanges

So, what exactly are health insurance exchanges? In addition to establishing an exchange for individuals to purchase insurance in 2014, states must simultaneously set up a so-called “small-business health options program” by which small employers can purchase insurance. Plans offered on the exchange will have to be standardized for easy comparison and offer minimum levels of benefits established by the bill. Starting in 2017, a state can open exchanges to large employers (101+ employees).

Pre-existing Conditions

Beginning in 2014, people with preexisting conditions will be able to purchase insurance on an exchange. In the meantime, each state will have to create a new, temporary program, such as a high-risk pool, to provide coverage to people with pre-existing conditions.

The truth remains, if you are no longer able to sustain or expand your business in your current financial situation, filing for bankruptcy may be your best bet. And, in this case, the best move a beleaguered small business owner can make is to consult an experienced bankruptcy attorney who specializes in small business cases. Skilled bankruptcy attorneys like those at The Law Offices of John T. Orcutt can get to work early, navigate any uncertain waters of bankruptcy court and work in your best interests during the duration of your small business bankruptcy. The attorneys at The Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or during the off hours, you can make your own appointment right online at Simply click on the yellow “FREE Consultation Now” button.

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