Employers
Learn More About Small Business Tax Credits
- IRS Small Business Tax Credit Information
- Small Business Tax Credit Qualifications
- Small Business Tax Credit IRS Guidance
Urgent Updates About Grandfathering
2010
Small Business Tax Credits
Beginning in 2010, qualified small businesses (those employing fewer than 25 employees and with average annual wages of less than $50,000) are eligible for tax credits. These credits are up to 35 percent of the employer’s premium.Tax-exempt small businesses are eligible for a credit of up to 25 percent. Small employers with 10 or fewer workers with an average wage of $25,000 or less may receive the full value of the credit.
To qualify for a tax credit, an employer must contribute at least 50 percent of the total premium. In 2014, small employers who purchase coverage through an exchange may receive a two-year tax credit of up to 50 percent. Tax-exempt businesses would be eligible for a tax credit of up to 35 percent.
Elimination of Lifetime Policy Limits
Beginning with plan years that are new or that renew on or after September 23, 2010, insured and self-funded plans will no longer be able to include lifetime limits on essential benefits in their policies. Insurers and self funded plans may still impose lifetime limits on “nonessential benefits.” The federal government has yet to issue an exact definition of what benefits will be considered essential benefits.
Elimination of Annual Limits on “Essential Benefits”
Beginning for plan years that are new or renew on or after September 23, 2010, most plans will be limited in their ability to decrease annual limits in their policies for “essential benefits” (this will be further clarified in HHS rules).
Simple Cafeteria Plans for Small Businesses
Effective for tax years after December 2010, the health care reform laws create a Simple Cafeteria Plan to provide a vehicle through which small businesses can provide tax-free benefits to their employees.
A cafeteria plan is a written benefit plan maintained by an employer under which all participants are employees and each participant has the opportunity to select the particular benefits that he or she desires among a range of offered benefits. Under a cafeteria plan, employees may choose among two or more benefits consisting of cash (a taxable benefit) and qualified nontaxable benefits.
Medical Loss Ratios
Starting in 2010, plans issuing individual or group health insurance are required to annually report the percentage of total premium revenue spent on reimbursement for clinical services; activities that improve health care quality; and all other “non-claims costs,” excluding state taxes and licensing or regulatory fees. Health plans must provide rebates to consumers if their medical loss ratio (MLR) is less than 85% for large group coverage and less than 80% for individual and small group coverage. This MLR amount is on an aggregate, not a per policy basis.
2012
Reporting The cost of Health Coverage
Beginning in 2012 many employers will have to report to their empoyees the annual cost of paid for each employee's health coverage. The terms cost of coverage will appear on employee W-2 forms.
Medical Loss Ratios
Starting in 2010, plans issuing individual or group health insurance are required to annually report the percentage of total premium revenue spent on reimbursement for clinical services; activities that improve health care quality; and all other "non-claims costs," excluding state taxes and licensing or regulatory fees. Health plans must provide rebates to consurmers if their medical loss rotio (MLR) is less than 85% for large group coverage and less than 80% for individual and small group coverage. This MLR amount is on an aggregate, not a per policy basis.
2014
Employer Penalties
Begining in 2014, applicable large employer will be required to provide group health coverage for their employees or force penalties for not doing so. An applicable large employer is an employer that employs 50 or more full time or full time equivalent employees. An employee is considered full time if the employee works 80 or more hours per week.
Two different penalties may apply depending on whether the applicable large employer does not offer coverage or offers coverage that one or more of its employees cannot afford. If the employer does not offer coverage it would pay an annual penalty of $2,000 per employee (the law deducts 30 employees for purposes of the penalty colculation, however). If the employer offers coverage that one or more of its employees cannot afford and if those employees obtain subsidized individual through a health insurance exchange, the employer would pay a penalty of $3,000 per employee with coverage through an exchange.
