Congress Takes Steps to Avoid Negative Effects of Affordable Care Act on Small Businesses

One facet of the Affordable Care Act is specific benefit requirements that have to be offered by small businesses (those with 50 or fewer employees). These requirements were scheduled to begin applying to employers with up to 100 employees on January 1, 2016. Business leaders were concerned, however, this change would result in substantially increased health insurance costs for the businesses forced to meet the requirements.

Congress passed a bill in October that gives states the right to determine if businesses with 51 to 100 employees should be considered a small business for the purposes of the Act. It is widely anticipated that states will keep the small business designation capped at 50 employees or less.

This episode marks the 14th time Congress and President Obama have agreed on legislation to fix bugs in the Affordable Care Act. Among the most notable fixes was a bill passed in 2011 repealing a provision that required businesses to report to the IRS any purchase of more than $600 to an individual vendor. Another big fix was a 2013 change repealing an optional long-term insurance plan that proved impractical.

One of the side benefits of this most recent revision is that it will result in more disposable income for employees. That is good news for both the wage earner and the government. With more disposable income comes more reportable income. Therefore, the IRS will collect an estimated $280 million in additional income tax revenue.

Another change still being contemplated by Congress is a repeal of the 2.3% tax on medical devices. In addition, the Act’s so-called “Cadillac Tax” is being targeted for repeal. That provision imposes a special tax on high-priced employer-offered health care plans.

In other words, the Affordable Care Act doesn’t appear to be anywhere close to its final form. Stay tuned…

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®.  We are well-versed in the federal and state laws that apply to businesses, including the Affordable Care Act. Make an appointment today to discuss any questions you have about the ACA’s requirements or schedule a LIFT Start-Up Session™ or LIFT Audit™ if your company is established, both of which include employment structuring, financial, and tax systems you need for your business.