The Patient Protection and Affordable Care Act expands small business tax credits for employer health insurance contribution.
For tax years 2010 through 2013, qualified small businesses are eligible to receive a tax credit of up to 35 percent of their contribution toward health insurance premiums for their employees. A tax credit of up to 25 percent for small nonprofit organizations also is available. Qualified small businesses are defined as having 25 or fewer full-time equivalent employees with average wages of less than $50,000. The employer must contribute at least 50 percent of either the total premium cost or a benchmark premium to be eligible. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. However, the credit phases out as company size and average wage increases. Part-time workers are counted in the full-time equivalent calculation based on hours worked.
Effective Jan. 1, 2014, each state will establish a Small Business Health Options program to facilitate the purchase of qualified health plans for employees. States may opt to combine these small employer exchanges with the American Health Benefit Exchanges, which they are required to establish for individuals. To encourage participation in these state exchanges, eligible employers who purchase coverage through them can receive a tax credit for up to 50 percent of their contribution toward health insurance premiums for their employees. This credit will be available for two years. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. However, the credit phases out as company size and average wage increases.
Beginning in 2017, employers with up to 100 employees also may enroll in the Small Business Health Options program.
Effective fiscal year 2011, employers with 100 or fewer employees can receive a grant to offer wellness programs. To be eligible, these programs must maximize employee engagement, create a workplace environment that encourages healthy lifestyles, and implement health awareness initiatives and programs designed to change unhealthy behaviors. The Secretary of Health and Human Services is responsible for determining the eligibility criteria. These grants will be available for up to five years.