Health care reform
To encourage small business to offer health insurance to their employees, PPACA includes a sizable tax credit for businesses that:
This credit ranges from 25% to 50% of the cost of insurance, depending on the year, the number of employees, and whether the business is for-profit or non-profit.
For 2014, the maximum credit is 50% for businesses with 10 or fewer FTEs paying an average annual wage of $25,000 or less when the coverage is purchased through the Small Business Health Options Program (SHOP). A final rule issued by the IRS, effective June 30, 2014, clarifies that this credit can be claimed for any two consecutive taxable years beginning 2014.1
Click here to read more about creating a benefits strategy using the advantage this tax credit provides.
More about SHOP
The SHOP Marketplace is a health insurance exchange for businesses with fewer than 100 employees, although until 2016 most states will likely limit access to employers with 50 or fewer employees. Through SHOP, smaller employers will be able to offer employees a variety of Qualified Health Plans, and employees can choose the plans that fit their needs and their budget.
The SHOP Marketplace can help smaller businesses by simplifying choices, preserving employer control and lowering costs by spreading insurers’ administrative costs across more employers.
The federally run SHOP Marketplace will be available starting in November 2014, although what each state offers—employee choice or a single plan—will vary by state. Learn more.
Businesses may be eligible for small business tax credits when they offer health coverage through a SHOP exchange. Small employers need to understand how the tax credit works and whether they are eligible — and make benefits plans that recognize the credit's two-year duration.
SHOP is intended to make it easier for employees to access and compare health insurance policy information, and to obtain subsidies for insurance costs, if they are eligible. For some employees of small businesses, SHOP and the tax credit may make medical insurance available to them in the workplace for the first time.