In 2010, the American government passed the largest healthcare bill since Medicare. This new law, known as the Affordable Care Act, is set to reshape how Americans handle their health insurance and could open new insurance options for small businesses.
While some parts of this bill are already in action, most of the major sections don’t kick in until 2014. How will this law affect you and your business? Let’s break it down piece by piece.
Set Up Exchanges to Compare Options
In the past, shopping for health insurance wasn’t that convenient. You needed to take time out of your busy day to meet with agents from a bunch of insurance companies. Through each meeting, you had to compare the complex details of different plans and hopefully find one that worked for you and your employees.
The ACA is supposed to develop a better marketplace for health insurance. Under this law, each state needs to set up an exchange that breaks down the details of plans for people to compare. Your employees will each be able to buy their own separate plan so everyone can customize to what they want.
Subsidies to Buy Coverage
Buying health insurance in American isn’t cheap, especially if you’re trying to buy it as an individual. True to its name, the Affordable Care Act tries to make insurance less of a backbreaker by offering subsidies. This is free money to make plans less expensive. Many Americans can qualify; it’s not just for people barely scraping by. As of 2014, an individual making less than $44,000 a year will qualify for government subsidies to buy insurance.
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No Rejections for Preexisting Conditions
In the past, applying for health insurance was always a gamble. This is because insurance companies would examine your health history and could reject you if you had too many health issues. Starting in 2014, this will no longer be allowed. Insurance companies will need to accept any applicant to their plans and can’t base the decision on past health issues.
Mandatory Insurance Coverage
In exchange for these benefits, the American government expects all Americans to buy health insurance. Starting in 2014, you need to buy into a plan. If you don’t, the IRS will charge you a penalty of $95 per month up to a maximum of $285 or 1 percent of your salary, whichever is greater. This tax penalty would be added to whatever you would owe in regular income tax for the year. Be sure to let your employees know about this penalty so they sign up in time as well.
Pricing System Closer to Large Group Plans
One of the biggest disadvantages for small business health insurance plans is that the costs were based on a tiny group. If one person in your company became sick and built up huge medical bills, everyone’s coverage would explode in cost. Huge companies could survive because they could spread this cost over hundreds of employees but small business owners were not so lucky.
By combining Americans on plans through insurance exchanges, it’s the same as combining people into one large group plan. That way you won’t see your health insurance price tag skyrocket should one of your employees become sick.
The Affordable Care Act is not a perfect plan and could run into problems as it becomes more established. However, it does offer quite a few benefits that should make health insurance more manageable for small business owners.
Megan Totka is the Chief Editor for ChamberofCommerce.com. She specializes on the topic of small business tips and resources. ChamberofCommerce.com helps small businesses grow their business on the web and facilitates connectivity between local businesses and more than 7,000 Chambers of Commerce worldwide.