Sole Proprietors and Obamacare: What do you need to know?
We’ve gotten several questions lately from clients with questions about what Obamacare means to their small business. So the question that we often get from clients who are sole-proprietors is, “What about sole proprietors and Obamacare? What happens if I’m a one-person business?”
One of the more controversial provisions of the Affordable Care Act (aka, PPACA, ACA or Obamacare) was the provision to require all U.S. citizens and legal residents to have health insurance or pay a penalty. This means that if you’re a one-person business, the impact for sole-proprietors will be pretty much the same for you as it is for an individual.
As a one-person business, you will be required to buy insurance through your state’s benefits exchange that will roll out in 2014. If your state is one of the many who have decided to opt-out of the state exchange, you will have the option to buy in to the federal exchange.
(To watch a webinar by Merit Resources' Sean Yolish on Health Care Reform for small employers (under 50 employees) click here, for large employers (50+ employees) click here.)
There are some exemptions, of course. If you have certain religious backgrounds and if you’re eligible for the so-called “hardship exemption” if the cost of the annual premium exceeds 8% of annual income. Here are the exemptions to buy coverage under the Affordable Care Act (also see our graphic below in this email):
- You are part of a religion opposed to acceptance of benefits from a health insurance policy
- You are an undocumented immigrant
- You are incarcerated
- You are a member of an Indian tribe
- Your family income is below the threshold requiring you to file a tax return ($9,350 for an individual, $18,700 for a family in 2010
- You have to pay more than 8% of your income for health insurance after taking into account any employer contributions or tax credits
(Click here to download a free Health Care Reform Checklist and PPACA Timeline.)
So if I’m a sole-proprietor, how will you know if you’ve satisfied the requirement to purchase insurance? Were you insured for the whole year through a combination of any of the following sources?
- Medicaid or the Children’s Health Insurance Program (CHIP)
- TRICARE (for service members, retirees and their families) The Veteran’s health program
- A plan offered by an employer
- Insurance bought on your own that is at least the Bronze level as regulated by the ACA
- A grandfathered health plan in existence before the health reform law was enacted
So if I don’t qualify what is the penalty for being without health insurance under the ACA?
- In 2014 that penalty is $95 per adult and $47.50 per child (up to $285 for a family or 1.0% of family income, whichever is greater.
- In 2015 the penalty is $235 per adult and $162.5 per child (up to $975 for a family) or 2.0% of family income, whichever is greater
- In 2016 and beyond the penalty is $695 per adult and $347.50 per child (up to $2,085 for a family) or 2.5% of family income, whichever is greater.
Check Merit Resources' infographic on the ACA individual mandate below, which describes the info provided in this post:
Is my business eligible for Small Business Tax Credits under the ACA?
We’ll talk more about Small Business Tax Credits in future posts, but for now, this is what you need to know.
If you’re a business with 10 employees or less, earning an average of $25,000 or less, you’re likely eligible for the SBTC. The full credit is 35% of your contribution toward an employee’s insurance premium. What this means is, the tax credit goes down as your business size and average wage amount goes up. Further, if your business reaches 25 full time equivalents (FTEs), or average salaries in excess of $50,000, the SBTC is phased out. Starting in 2014, the state-based Small Business Health Options Program Exchanges will be open to small businesses. If you get your insurance through those exchanges, your maximum tax credit could go up to 50% of your contribution.
Want to find out if you qualify for the SBTC? Click here for this handy calculator.
With the Supreme Court's 2012 ruling on the ACA, it removes a large source of uncertainty surrounding this very important national issue. With all the provisions of the law still in place, as an employer you'll need to redouble your compliance efforts. This is especially important regarding such immediate requirements of the law such as providing summaries of benefits and coverate to your employees. Merit would like to be there to help you navigate this stuff.
Feel free to contact us by clicking the button below for a free consultation on how we can help you navigate the world of health care reform.
To watch a webinar by Merit Resources' Sean Yolish on Health Care Reform for small employers (under 50 employees) click here, for large employers (50+ employees) click here.