What health care reform means for businesses

What small businesses need to know

For most small businesses, the court's decision last Thursday means a new way for them to shop for less expensive health insurance on state exchanges.

The ruling also means that companies with 50 or more full-time employees must start providing health insurance for all workers by 2014 or face stiff penalties.

Starting in 2014, solo entrepreneurs and small businesses can shop for less expensive insurance through exchanges in each state. One-person businesses can turn to exchanges for individuals. Companies with up to 100 workers may turn to Small Business Health Options programs. Both have a similar approach to bringing down costs: increasing the size of the insured pool spreads out risk.

The mandate also adds a major cost to solo entrepreneurs -- those with no employees -- who must now buy health insurance for themselves or pay a fine. But solo entrepreneurs also get the new option to buy insurance on state exchanges, which are intended to lower costs for everyone by expanding the pool of insured and spreading out risk.

Business will face fines

Any company with at least 50 full-time employees must start providing insurance to staff in 2014. If they don't and a single worker turns to the government for a health care tax credit or subsidy on the exchanges, then the company has to pay fines.

And it won't be cheap. The penalty starts at $40,000 and increases with the size of the firm's workforce by $2,000 for each additional worker past 50. If coverage is deemed substandard by those measures, the company is hit with an even higher penalty of $3,000 per employee.

Individual mandate: what it means

Everyone must purchase some sort of health insurance by 2014. At companies with fewer than 50 workers, that responsibility falls on the employees themselves. Entrepreneurs, of course, will also need to buy insurance for themselves.

Choosing not to buy insurance in 2014 will cost someone $95 or 1 percent of their income, whichever is higher. In 2015, it's $325 or 2 percent of income. Penalties rise each year after that. For cash-strapped entrepreneurs, it's an added burden as they struggle to run their businesses.

Tax credits: what changes and what stays the same

Some small businesses will remain eligible for the existing health care tax credit, which will stay in place. Since 2010, the federal government has rewarded companies for providing health insurance if they have fewer than 25 workers and pay average salaries of $50,000 or less.

The credits averaged $2,700 last year per business. Only 170,300 companies received it for tax year 2010, even though the government estimates between 1.4 million and 4 million were eligible.

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