WHAT SMALL BUSINESS OWNERS

HEALTHCARE LAWS NEED TO KNOW ABOUT

WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

INTRODUCTION TO PPACA COVERAGE INCLUSIONS & EXCLUSIONS DETERMINING THE SIZE OF YOUR BUSINESS SELF-EMPLOYED SMALL BUSINESSES LARGE EMPLOYERS WHERE TO FIND MORE INFORMATION

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

Wondering how The Patient Protection Affordable Care Act (PPACA), also known as 'ObamaCare' impacts your small business? Under the PPACA, also commonly referred to as simply the Affordable Care Act, or ACA, small businesses can now provide health care insurance coverage to their employees at rates that are on-par with what large corporations pay for similar coverage, making it easier for entrepreneurs and small-to-medium sized enterprises to attract, and retain, high-quality employees.

Mandated Minimum Coverage The ACA requires every American to obtain, and maintain, a minimum level of essential health care insurance coverage each year; failure to do so can result in stiff tax penalties. In 2016, the tax penalty for failing to have the minimum insurance is the greater of $695 or 2.5% of personal pre-tax income. In order to ensure equitable access to coverage, a variety of cost-assistance options are available, including tax credits, cost-sharing reduction subsidies, CHIP and Medicaid. Mandatory Reporting All employers who provide self-insured health care coverage to their employees must submit an annual information return to the Internal Revenue Service, regardless of the size of their workforce, commencing in 2016 (for coverage provided in 2015). Small Business Tax Breaks & Credits The ACA offers a wide range of tax breaks, tax credits and incentives designed to offset the cost of providing insurance for small businesses, however, companies must meet specific criteria regarding the size of their workforce and the average salary of their employees in order to qualify for these credits.

To help better understand how the ACA impacts you, your business and your employees, we've assembled this clear-language overview that covers:

•  Coverage Inclusions and Exclusions •  Determining The Size of Your Small Business •  Self-Employed Entrepreneurs, Freelancers & Contractors •  Small Businesses •  Large Employees

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

Guaranteed Coverage for Children Under 19 Prior to the ACA, insurance providers could either limit, or completely deny, coverage for children under the age of 19 who had a known, pre-existing medical condition. Coverage for Adult Children Under 26 The ACA includes the option for parents to keep their children on their health insurance policy up until the child's 26th birthday, regardless of the marital or financial status of the child, or the child's own eligibility to enroll in their own employer's plan. Entitlement to Approved Preventative Screening Without Co-Payments/Costs The ACA mandates that private insurance plans provide certain preventative services and tests without charge, including routine immunizations, well-woman checkups and screening for certain types of cancer, diabetes, HIV and mental illness.

Coverage Exclusions & Inclusions The Affordable Care Act includes a new "Patient's Bill of Rights" designed to ensure all Americans have equal, fair access to health insurance coverage. Highlights of the ACA Patient Bill of Rights include:

Full Disclosure of Payment Decisions Insurers must provide patients with a clear explanation regarding any treatment or service that was denied coverage under their policies, along with timely access to an internal, then external, appeal process. 30 Days' Notice for Coverage Cancellation If an insurer chooses to cancel a policy, they must provide a minimum of 30 days notice to the patient. In addition, insurance companies can no longer rescind coverage for patients who made an honest mistake on their application; they also must provide clear explanations and evidence-based justification of any premium increases of 10% or more. Grandfathered Plan Exclusions In some cases, health insurance plans that were either issued, or renewed, prior to September 23, 2010 may be exempt from the protections provided under the Patients' Bill of Rights.

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

In order to decide which category your small business falls under, you need to start by calculating the number of full-time equivalent employees, or FTEs, you have.

Defining a Full-Time Employee According to the IRS, a full-time employee is defined as any employee who works an average of 30 hours or more per week. Since many employees work swing shifts and compressed work weeks, any employee who works 130 hours or more per month is also considered to be a FTE. In the case of salaried employees, three different methods are available to determine whether that employee is classified as a FTE: •  Counting actual hours of work •  Using a days-worked formula, in which every eight hours

of work is counted as one day •  Using a weeks-worked formula, in which 40 hours of

service weekly counts as a full week It's up to each employer to use their own discretion when it comes to calculating the status of non-hourly/salaried employees, as long as the method they use is consistent, and is not skewed in a manner which disqualifies employees from health care insurance coverage.

Determining the Size of Your Business The first step in determining how the Affordable Care Act regulations impact you, and your business, is finding out exactly how your enterprise is classified under the Act.

0 Employees < 25 Employees < 50 Employees 50 + Employees

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

Self-Employed Business Owners Have Access to the Marketplace That means that freelancers, contractors, consultants and other entrepreneurs can enroll directly through the ACA Marketplace. During this process, applicants will learn if they qualify for tax savings and cost-sharing reduction subsidies based on both income and household size. Applicants will also learn whether they qualify for free or low-cost health insurance coverage through state-specific Medicaid and CHIP programs. Important Facts about Self-Employment and the ACA Here's a brief summary of how the ACA impacts health insurance coverage for adults who are self-employed: •  Health insurance is available through the Health Insurance Marketplace, also known simply

as "The Marketplace” •  Insurance is only offered during open enrollment, with the exception being 'Special

Enrollment" events including a change in family status (marriage, adoption or birth of a child), or loss of existing coverage due to job loss

•  Discounts and subsidies offered through The Marketplace are calculated based on projected income for the upcoming calendar year

•  Actual income that is either greater, or less than, the projected net income must be reported through the Marketplace online portal

•  Insurance premiums are fully tax deductible, so long as the claimant was not eligible for coverage under either their own, or their spouses', group insurance

•  Most health care costs which exceed 10% of adjusted gross income are deductible It's important to note that self-employed people cannot claim small business healthcare tax credits; only personal medical deductions apply.

Self-Employed Entrepreneurs, Freelancers & Contractors Under the Affordable Care Act, business owners who either work independently or only hire independent contractors (rather than part or full-time employees) are classified as being self-employed.

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

The SHOP Marketplace

The federally-regulated Small Business Health Options Program

(SHOP) is an online portal created under the Patient Protection and Affordable Care Act (ACA) which allows employers of between

1-100 full-time equivalent (FTE) employees to purchase dental and/or health insurance

policies for employees and their dependents.

SHOP was designed as a way to provide small business owners with access to lower rates on group health insurance plans from

private insurance companies by creating a large pool of purchasers; as a result, the

premiums charged through SHOP are comparable to those paid by large

businesses and corporations.

The SHOP Marketplace allows users to explore different health and dental

insurance plans, compare coverage levels, and review network types. Some states

operate their own SHOP exchanges, while others use the federal SHOP service.

Small business owners can purchase their

own personal coverage through a SHOP Marketplace as long as at least one

employee of their business also enrolls in SHOP coverage as well.

Small Businesses Having even one employee (aside from a spouse, co-owner, or family member) may allow the business to use the SHOP Marketplace for small businesses to source health care coverage.

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

Less Than 25 FTE Employees If your small business has fewer than 25 full-time equivalent (FTE) employees, you may quality for the Small Business Health Care Tax Credit. In order to qualify, your business must meet all of the following conditions: •  You offer health care coverage to your

full-time employees under the SHOP Marketplace

•  You employ 25 or less full-time equivalent (FTE) permanent employees

•  The average annual salary paid at your business is $50,000 or less

Small businesses can carry the small business tax credit forward, or back to other tax years, and because the health insurance premiums are greater than the total tax credit, eligible small businesses are able to claim a tax deduction for the difference between the actual premiums and the credit. As a result, small businesses are eligible to receive both a tax credit, and a tax deduction for any employee premiums they pay. Businesses with fewer than 25 employees are exempt from tax penalties if they do not offer health insurance coverage, however, offering coverage may be beneficial to small businesses in terms of both the tax implications and employee recruitment and retention.

25 to 49 FTE Employees As with small businesses that have fewer than 25 employees, any small business that employees 25-49 FTE's can provide health care coverage to their employees and eligible dependents through the SHOP program on the Health Insurance Marketplaces. SHOP is available to all small businesses with up to 49 FTEs; it is designed to pool the purchasing power of small employees, enabling access to high-quality coverage at a price that's designed to be affordable. Eligible employers may also qualify for credits of up to 50% through the Small Business Tax Credit.

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

Minimum Employee Participation It's important to note that small businesses that choose to use SHOP must offer coverage to all full-time employees and in most states, including throughout the Northwest, at least 70% of eligible employees need to enroll in a SHOP plan in order for the business to maintain coverage (not including those who already have existing coverage via a spouse's health care plan). Businesses that do not meet the minimum participation requirement may still enroll in SHOP coverage each year from November 15 to December 15. Open Enrollment & Premium Payments Health insurance can be purchased through the SHOP Marketplace at any time, otherwise known as 'Open Enrollment', as long as the minimum employee participation threshold has been met. Once an employer has selected the type of coverage they'd like to offer their employees, they then have to determine the amount of premium co-payment that eligible employees will be required to contribute. Employers can opt to pay all, or part, of their employees' premiums, however, some states do have set minimums that regulate employer contributions. Employees who opted out of the initial enrollment period can still join their employer-sponsored plan if they fulfill the requirement for the Special Enrollment Period. Qualifying life events include having a baby, adopting a dependent child, or getting married. New hires can access coverage at any time via open enrollment. Note that employee-only health care coverage purchased for an employee cannot cost more than 9.5% of their gross family income, while high-end insurance plans are subject to a 40% excise tax.

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

Essential Health Benefits The ACA requires that all health care insurance plans must include 10 designated essential health care benefits such as prenatal care, access to certain preventative screening tests for diseases such as diabetes and cancer and access to birth control. All health care insurance plans sold on the SHOP Marketplace meet, or exceed, the essential health benefit requirement of the ACA. New In 2016 In 2016, a number of changes were introduced to the SHOP Marketplace, including the availability of health-only, dental-only, or combined health and dental plans; an expedited online SHOP Marketplace renewal process with pre-populated forms; and the option for employers to offer either a single health insurance plan, or a choice of plans to their employees. State-Specific SHOP Marketplace Some states have opted to develop their own SHOP Marketplace, while others provide access via HealthCare.gov. In the Northwest, small business owners in Alaska, Idaho, Montana, Oregon, and Wyoming can purchase health and dental coverage for their employees through the federal SHOP portal, while in Washington state, coverage is available through the state-run SHOP exchange, Washington Healthplanfinder. Employers in all member states of Better Business Bureau serving the Northwest are subject to the 70% minimum employee participation clause. The clause requires at least 70% of all employees who are offered SHOP health care coverage to enroll in their employer-sponsored plan in order for their employer to maintain eligibility for coverage through the SHOP Marketplace.

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

Under the employer mandate, businesses must either provide their employees with health care coverage that is both affordable and meets the standards for 'minimum value' to at least 95% of their full-time employees and their dependents. Failure to do so will result in the business being assessed a monthly, per-employee 'Employer Shared Responsibility Payment' collected by the IRS. 90-Day Maximum Waiting Period for Eligible Employees The ACA mandates that employers must offer health insurance coverage to new hires within 90 days of their employment start date. Workplace Wellness Programs & Grants To encourage a culture of prevention, incentives have been created to encourage workplace health programs that promote healthy behaviors, improve employees' health knowledge and skills, help employees get necessary health screenings and follow-up care and more. Flexible Spending Accounts Under the health care law, employees can't contribute more than $2,550 to their Flexible Spending Accounts per year in tax year 2016, however, it's important to note that this limit does not apply to employer-initiated contributions to the employees' FSAs. Employees can use the funds within their FSA to cover some medical and dental costs for themselves, their spouse, and eligible dependents. For example, an FSA can be accessed to pay deductibles, co-payments, prescription and over-the-counter medications, as well as medical equipment like dressings, mobility aids and diagnostic supplies. Typically, any unused balance remaining in an FSA is forfeited at the end of each calendar year, however, employers may either allow employees to 'carry over' up to $500 into the next year or allow employees to access the previous-years' FSA for up to 75 days into the new year.

Large Employers As of January 1, 2015, all businesses with 50-99 full-time equivalent employees must insure all their full-time workers, also known as the 'employer mandate'.

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WHAT SMALL BUSINESS OWNERS NEED TO KNOW ABOUTHEALTHCARE LAWS

For More Information The following resources are available to small business owners who need more information about how the Affordable Care Act impacts their enterprise: Internal Revenue Service - Affordable Care Act (ACA) Tax Provisions U.S. Centers for Medicare & Medicaid Services - SHOP Marketplace Tools & Calculators The Small Business Health Care Tax Credit U.S. Small Business Administration - Small Business Health Care

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