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The Affordable Care Act: What Every Franchise Needs to Know

Small employers can lower their costs by pooling the risk of providing health insurance with other small businesses buying plans in the “Marketplace.”

Now that the implementation of the Affordable Care Act is in full swing, it is more critical than ever that America’s small-business owners learn the facts about how the law will impact their business. Over the years, the rapidly rising price of health coverage has made it difficult for many businesses to find health insurance that meets their employees’ needs or budget. Under the ACA, America’s more than 800,000 franchise establishments will have new options and better access to affordable care for their employees.

Across the country, small businesses are already benefiting from improved accountability and affordability in the health insurance market.  Insurers selling to small businesses must now justify any double-digit rate and provide rebates if they spend less than 80 percent of premium revenue on health care.  Last year, 3.3 million consumers insured through small businesses received average rebates of $174.  Even better, the proportion of double-digit rate increases proposed by insurance companies dropped from 75 percent in 2010 to 14 percent at the start of 2013.

Small Business Health Options Program

Small-business owners also have a new way to shop for insurance thanks to the new Health Insurance Marketplace.  The small employer section of the Marketplace, known as the Small Business Health Options Program or SHOP, gives employers with 50 or fewer full-time equivalent workers some key advantages to help them provide health insurance to their employees. Small businesses have historically paid an average of 18 percent more than big businesses for the same health coverage. By purchasing SHOP certified health plans, small employers can lower their costs by pooling the risk of providing health insurance with other small businesses buying plans in the Marketplace. SHOP marketplaces that are run by individual states may allow businesses to enroll through their SHOP website.  Make sure that you visit www.healthcare.gov to link to your state’s SHOP website to find out how to enroll.

In 2014, small businesses in states with a SHOP Marketplace that is run by the federal government will enroll their employees in coverage through an agent, broker or insurer who offers a certified SHOP plan and has agreed to conduct enrollment according to Health and Human Services standards. This process, called “direct enrollment,” is similar to how most small employers get insurance today. There is no need to apply for SHOP eligibility before enrolling, or to use HealthCare.gov, unless you’d like to see information on your plan options, including which insurance companies offer SHOP Qualified Health Plans in your area. Getting the SHOP eligibility determination in 2014 will allow you to claim the expanded Small Business Health Care Tax Credit at the end of your tax year if you also meet the other requirements for the tax credit.

SHOP provides small employers with clear, straightforward information about plans’ pricing and benefit packages before they enroll. Business owners are able to make apples-to-apples comparisons and decide up front how much they will contribute toward health insurance costs. Additionally, insurers are now prohibited from hiking premiums if one employee gets sick, allowing businesses to better predict their health care spending.

Unlike individuals, small employers can enroll in SHOP certified insurance plans on a monthly basis throughout the year. The SHOP call center is available to answer any questions small employers may have regarding the SHOP application and enrollment: 1-800-706-7893. To receive additional information, visit www.healthcare.gov.

Hundreds of thousands of small employers with lower and moderate wage employees have already received tax credits of up to 35 percent of the business’s contribution to employees’ health insurance premiums. This tax credit is worth up to 50 percent of employers’ premium contribution in 2014 for otherwise qualified small employers who purchase SHOP certified plans.

 Employer Shared Responsibility Provisions

Meredith Olafson is senior policy advisor for the U.S. Small Business Administration

Meredith Olafson is senior policy advisor for the U.S. Small Business Administration

Many franchise owners may also wonder whether they are subject to the Employer Shared Responsibility provisions of the law. First, it is important to remember that 96 percent of businesses are too small to be impacted by the provisions, and the vast majority of businesses that meet the size requirements already provide sufficient insurance to their employees.  However, companies with common owners that fall under the long-standing IRS “controlled group” rules will be aggregated together for purposes of calculating the number of full-time equivalent employees under these provisions. If you are a franchise owner with multiple locations, be sure to ask your tax advisors whether these rules apply to you.

The U.S. Small Business Administration is committed to ensuring that small businesses and franchise owners know the facts about how the Affordable Care Act will impact their business, and SBA has trained thousands of our staff and network of resource partners on the ground to serve as resources in their communities. To locate the SBA office nearest you, visit www.sba.gov.  You can also visit Business.USA.gov for more information about how the law may impact your franchise.

For many small businesses, offering health coverage is a key to recruiting skilled employees.  For others, it’s a way to take care of their workers.  For some, it can even be a measure of their business’s success.  The health care law allows small employers to offer health coverage in a way that makes sense for their business and works for their bottom line.  That’s good news for America’s franchised businesses and for their millions of employees.

Meredith Olafson is senior policy advisor for the U.S. Small Business Administration. She can be reached at community@sba.gov. 

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