Answers to More Small Businesses Questions About ObamacareBy
As signups for Affordable Care Act coverage loomed last year, we received a barrage of questions from small business owners wrestling with the details of insurance exchanges, tax credits, and employer mandates.
Most of the noise has died down—for now—but many are still confused. Here are a couple of recent questions and answers.
Question: I’m a shareholder employee of a Sub-S corp. I’ve been paying health insurance for myself and my family and taking a tax deduction on my 1040. If I buy the insurance through an Obamacare exchange and get a subsidy, will this tax treatment still be allowed?
Answer: Self-employed individuals, including more than 2 percent shareholders of S-Corporations, can generally deduct premiums for health insurance on their tax returns. However, if you’re buying individual coverage for yourself and your family through an ACA marketplace, only non-subsidized premiums can be deducted, says David A. Lindgren, compliance officer at Flexible Benefit Service, which operates a private insurance exchange and administers benefits for companies nationwide.
That’s because the subsidies offered for low- and moderate-income individuals in the state and federal Obamacare marketplaces are actually advance premium tax credits. So taking the tax credit up front and also after the fact, for the full cost of your premium, would be double-dipping. “A self-employed person whose income makes them eligible for a marketplace advanced premium tax credit can only deduct the portion of the premium that they pay out-of-pocket, not the portion covered by the advanced premium tax credit,” says Linda J. Blumberg, senior fellow at the Urban Institute’s Health Policy Center.
Question: I have two employees in my Nashville, Tenn., business and I want to know how I can offer medical insurance to them. Is it something that can be done through Obamacare?
Answer: Two employees constitutes a group for insurance purposes, so you can certainly buy group insurance that will cover you and your employees, says Marcus Newman, vice president of employee benefits at GCG Financial. You aren’t mandated to provide it because you have fewer than 50 employees, but “the products you’ll have to choose from will all be ACA-compliant group plans,” he says.
There is a Small Business Health Options Program (SHOP) exchange under the ACA, specifically for employers with up to 50 employees to offer group health coverage. However, some features of the federal and state SHOPs were delayed late last year as officials shifted focus to the bungled individual marketplace rollout.
In Tennessee, online SHOP enrollment is not currently available, but you can buy coverage for your workers if you go through a certified broker, Blumberg says. Enroll by the 15th of the month for coverage that starts as soon as the beginning of the following month.
It may be worth investigating the SHOP options, depending on the average wage of your employees. You could be “eligible for significant tax credits to pay the employer portion of the premiums, so that is definitely worth checking out,” Blumberg says.