President Obama's Affordable Care Act goes into effect at the beginning of 2014, and California small businesses are now able to get a preview of what the cost of coverage could be for their employees next year.
Though the rates are lower than those currently being charged by insurance companies for similar plans, some businesses may find that it makes more financial sense for employees to use individual plans.
The Affordable Care Act requires the establishment of health insurance exchanges which insurance companies can compete with to provide competitive pricing for both individual and business health insurance coverage. Covered California is the California state-run exchange, which has recently unveiled the pricing for its portfolio of coverage. The cost of coverage for small businesses is below current premiums in many California counties. For instance, rates in Los Angeles County are expected to drop as much as 17 percent for a 40-year-old employee. Other rates are also expected to drop proportionately.
According to one small business advocacy group, a start-up company or small business may find that it makes more sense to allow employees to sign up for their own individual plans. If a business's profit margins are slim, individuals can take advantage of subsidies on the individual exchange. Small businesses that do offer health insurance to employees may be eligible for up to a 50% federal tax credit on the purchase of premiums on the exchange.
The changes in the law for small businesses with regard to employee health care can affect both the bottom line and a company's legal responsibilities. Working with an experienced attorney may help to smooth this transition for a corporation. A business law attorney may guide someone through entity formation, regulatory compliance and any other responsibilities of corporation ownership.
Source: Los Angeles Times, "Health insurance rates for California's small businesses unveiled", Marc Lifsher, August 01, 2013