Information for Businesses

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Small businesses can get more information about employer issues related to health care reform from the U.S. Internal Revenue Service (IRS), U.S. Department of Labor (DOL)U.S. Health & Human Services (HHS) and HealthCare.gov.

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I own a small business. Will I have to buy insurance for my employees? What assistance is available to me?

It depends on the size of your firm. Companies with fewer than 50 employees won't face any penalties if they don't offer insurance. Companies can get tax credits to help buy insurance if they have 25 or fewer employees and a workforce with an average wage of up to $50,000. Tax credits of up to 35 percent of the cost of premiums became available in 2010 and reached 50 percent in 2014. The full credits are for the smallest firms with low-wage workers; the subsidies shrink as companies' workforces and average wages rise. Beginning in 2015, firms with more than 50 employees that do not offer coverage will have had to pay a fee of up to $2,000 per full-time employee if any of their employees receive government-subsidized insurance coverage in the Marketplaces. The first 30 workers are excluded from the assessment.

I am self-employed. Will the new law impact my health insurance choices?

Yes. Beginning Jan. 1, 2014, self-employed individuals and their families must be included in the small group market in all states and have the option of purchasing coverage through the Marketplace.

How does the Small Business Health Care Tax Credit work?

The federal health reform law provides a Small Business Health Care Tax Credit to businesses for contributing toward their workers' health premiums. The credit applies to all amounts paid or incurred in taxable years beginning after Dec. 31, 2009.

Businesses with fewer than 25 full-time equivalent employees (FTE) and average annual wages less than $50,000 per employee qualify for the credit. To receive the tax credit, an employer must have a group health plan and must pay at least 50 percent of the premium.

The tax credit is not available for coverage for working owners (sole proprietors, partners, five percent shareholders, two percent shareholders of S corporations) and their immediate families. Coverage for seasonal employees who work 120 or fewer days is not eligible for this tax credit.

How much is the tax credit?

The Small Business Health Care Tax Credit is a percentage of what the employer pays and is based on the average premium in the small group market in the state. The U.S. Department of Health & Human Services (HHS) is required to determine the average premium for each state or region.

Do I qualify for the tax credit?

You may learn more about qualifying for the Small Business Health Care Tax Credit on HealthCare.gov or the Internal Revenue Service's (IRS) website.

How do businesses claim the tax credit?

The Small Business Health Care Tax Credit is part of the "general business credit," which reduces the income taxes a business owes. If the credit is more than taxes owed, the unused credit can be carried forward or back to other years that a business has a tax liability. Tax-exempt small businesses may apply the credit to their payroll taxes.