Health Care Reform and Your Financial Planning

Health Care Reform and Your Financial Planning

When enrollment for the insurance marketplace options outlined in the Patient Protection and Affordable Care Act began in October of last year, business owners had plenty of questions. Now that the ACA and its health marketplaces are available, many owners are still untangling a complex financial situation. With more than 20,000 pages of legislation and an ever-shifting set of deadlines, understanding your options as a customer and responsibilities as an employer isn’t as simple as reading through the documentation.

Under the new system, health care insurance exchanges provide a range of options for individuals and families who are currently uninsured or under-insured. Some employers have found that little has changed; many have retained their current insurance programs. Others, however, have had to upgrade to plans that meet ACA requirements for insuring people with pre-existing conditions and other stipulations. If you are self-employed, the program could have a significant impact on your range of health care possibilities.

An estimated 9 to 10 million people have enrolled in the ACA marketplace, and if you’re a sole proprietor or self-employed contractor, you may be part of that number. With its multi-tiered structure, the reformed system delivers a wider range of health care options and easier cost comparisons to previously under-served workers. Those who opt out entirely and choose to remain uninsured face potential penalties of 1 percent of annual income or $95 per individual, whichever is greater, during 2014. Those costs are set to rise in coming years, so it’s important to speak with your CPA or financial advisor about your health care decisions.

The Affordable Care Act also affects small businesses that may not have been able to offer employees insurance packages in the past. Companies with fewer than 25 employees may be eligible for tax credits to help defray the costs of providing health insurance. The official White House Affordable Care Act site gives an overview of the impact on small businesses in its “Health Care and You” section. By requiring greater accountability for insurance companies and reducing costs associated with uninsured patients, the reform package is designed to offer more affordable care options for employers and owners of small businesses.

Like individuals, some businesses also face additional fees if they don’t comply with the new regulations taking effect now. The ESRP, or Employer Shared Responsibility Payment, will be assessed this year on companies with more than 50 full-time employees. Part of the Small Business Healthcare Options Program, or SHOP, includes protections for businesses and their employees who have pre-existing medical conditions. Under this portion of the Affordable Care Act, insurance plans cannot turn employers away based on the medical status of their employees.

The reform law’s text frequently cites full-time or full-time equivalent (FTE) employees, and that’s a critical distinction for anyone who hires independent contractors or freelance workers. Part-time employees’ hours add up and can affect companies’ rights and responsibilities under the new plan. Local laws also affect how health care reform is implemented; some states have chosen to use federal exchanges while others have set up in-state insurance marketplaces. New York and New Jersey have both opted for the Medicaid expansion that is part of the larger health care reform. Because each state treats the Affordable Care Act differently, it’s important to choose a CPA firm that’s well-versed in local applications of the law.

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