How Health Reform Will Affect Illinois Small Business Owners

Although the Patient Protection and Affordable Care Act passed, many small business owners still do not fully understand all of its implications. Some believe that it will still be repealed, and many employers say they will not make changes until it is absolutely necessary to do so.

A recent study showed that businesses with less than 25 workers may be affected by the new law just as much as the employees of these small businesses. Issues such as the prohibition of barring people with preexisting conditions play an important role in this. One of the topics the study analyzed was where small business owners obtained health coverage. Their situations were similar to those of employees of small businesses. Just as employees of small businesses often paid for private coverage, relied on a family member, or simply went uninsured, small business owners also fell into those categories. The survey showed that about 25 percent of small business owners were uninsured. Close to 50 percent relied on a family member's coverage. Less than 20 percent of employers received coverage through the companies sponsoring their workplace plans.

The study also found that about 60 percent of non-elderly citizens received employer-sponsored health insurance benefits. About 60 percent of entrepreneurs with private insurance earned as much as 400 percent more than the poverty level, which would give them tax credits under the PPACA. More than 80 percent of the small business owners without insurance would qualify for health coverage that is subsidized.

Financial Impact On Businesses & Workers
For employers with a workforce as small as 10 or larger than 500, experts predict that the per-worker cost of health insurance will rise more than six percent in the near future. In order to reduce the impact of the cost increase, employers plan to lay the costs on workers' shoulders. While most employers do not plan to cancel their health benefits, smaller companies are more likely to cancel their plans. More than 15 percent of employers said they would likely terminate their health plans after the PPACA has been fully implemented. While many changes will not take effect until 2014, the following changes should be expected beforehand and will affect self-employed people and small businesses.

- States must decide whether they want to use their own exchange programs or use a federal default model. Exchanges make it possible for individuals and employers with up to 100 workers to shop online for coverage options. Also, exchange enrollment will open after setup is complete. Click here to see a list of what type of exchange each state has set up.

- In years past, employers received a tax credit for up to 35 percent of their contributions to employee health plans. When the PPACA goes into effect in 2014, that rate will jump to 50 percent.

- From 2013 onward, W-2 tax forms will have an extra line showing benefits employees receive from employer-sponsored health plans. The purpose of this is to make spending and benefits more transparent. In order to gather that information, companies may have to pay more for W-2 preparation.

 - Married couples earning a joint income of more than $250,000 or singles earning more than $200,000 will pay a Medicare tax of almost four percent on any annuities, dividends, investment interest, investment income, rents and royalties. 

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