obamacare-small-biz ambulance


Want to Learn More about Obamacare?

We work with small businesses (SMBs) every day. In fact, we are a small business. It seems that all SMB’s have questions regarding the Affordable Care Act (Obamacare) and how it will impact small businesses. We are not experts in health care, attorney's or politicians, but we've tried to figure out how these changes may affect us. We hope our research and discovery can help you.
To help the businesses that drive our economy, we’ve put together a guide on Obamacare. We’ve attempted to do so in an apolitical way so that small business owners can get the facts needed to plan for the implementation of the law. So if you’re a small business owner looking for information on Obamacare including its facts, pros and cons, summary or text, calculator, penalties, history, resources and more, you’ve come to the right place!


s2-question-guy s2-qm-1 s2-qm-2 s2-qm-2

While it’s widely talked about and endlessly debated by politicians and talking heads, many people, including small business owners, aren’t entirely sure what Obamacare or the ACA is and what it exactly entails. So in layman’s terms, here’s a quick definition and some of the basics of Obamacare:

The Patient Protection and Affordable Care Act (PPACA), more popularly known as Obamacare or the Affordable Care Act, is President Obama’s signature policy achievement to date. It was signed into law on March 23, 2010. It is the most significant change to the U.S. healthcare system since Medicare and Medicaid passed almost 50 years ago.


Its stated primary purpose is to extend health coverage to uninsured Americans and reduce the future health insurance cost curve. To achieve this purpose, the ACA has built in subsidies, tax credits, penalties, and mandates. The bill itself has ardent critics and supporters on both sides of the political spectrum. One of the most debated provisions is the “individual mandate” that specifies that everyone must be covered by health insurance or pay a tax with only a couple of exceptions.

stethescope dollar-large dollar-large dollar-small dollar-small dollar-small

Individuals and some SMBs meeting specific requirements will be able to get subsidies if they purchase insurance coverage in government-run health insurance exchanges that rolled out on October 1st, 2013. These exchanges may be run in each state; however, if any state refuses to enact an exchange, the Federal Government will force that state to be enrolled in a federal exchange. An exchange is a marketplace where individuals and SMBs (known for SMBs as “Small Business Health Options Program” – SHOP) can compare and buy policies. Like everything else, the cost and funding aspects of Obamacare are vehemently debated but in theory, it is funded by a variety of taxes and cost savings.

s2-taxes s2-taxes-arrows

Taxes for funding the bill include everything from the Medicare tax rate, health insurance providers, medical devices, premium tax increases and even taxes from such services as tanning. Spending offsets include projected savings in the Medicare program and home health care payments.



Perhaps the most important potential effect of the passage and continued implementation of Obamacare is that on small businesses. Small businesses undoubtedly are a key cog in the U.S. economy and there is no doubt small business behavior will be changed due to key provisions within the healthcare law, such as:

  • SMB Owners will have to offer “affordable” health insurance regardless of pre-existing conditions and gender to all “benefit eligible” employees. This applies to SMBs who employ more than 50 full-time or full-time equivalent (known as FTEs or employees who work more than 30 hours a week) employees. Employers under the 50 FTE threshold are not required to offer benefits.
  • Firms with more than 50 employees or FTEs not offering health insurance will be penalized after January 1, 2015.
medical-icon medical-icon medical-icon

While this impact, and whether it will be positive or negative for the U.S. economy as a whole, is still widely debated, there is little doubt that it will directly change small business behavior in several ways. Most notably the impact could play out in various areas of a small business such as hiring and staffing, benefit packages, and even financial projections as employers grapple with uncertain costs based on the requirements of the law. These changes, scenarios, and cost considerations for small businesses are covered more in depth in the Obamacare and Small Business section.



Perhaps the most difficult part of understanding Affordable Care Act is wading through the partisan arguments for and against the law. Both sides having talked endlessly about the pros and cons of the law, not to mention the fact that individuals, businesses, and every other party with a vested interest have spoken up to detail what they believe will be the benefits or drawbacks of Obamacare. At the end of the day it leaves individuals and small business owners alike asking the question: How will Obamacare affect me? To make it as clear as possible, we’ve briefly summarized the primary pros and cons (in some cases theoretical since they’re still debated both ways) as put forth by both sides.


Health care coverage extended to adults 18 years and older with pre-existing conditions and regardless of sex as of January 2014.

Children can remain on their parents' plan until the age of 26 regardless of being enrolled in higher education or marital status.

Individual mandate means that more people are covered by health insurance – including employers offering insurance to all of their employees.

Health care law will lead to expanded Medicaid coverage.

Subsidies will be provided to help low-income people buy insurance. Provide more cosumer options.

Establish better consumer protections by providing protection against previous factors that affected prices including: family size, age, geographic location, and tobacco usage.

Reduces freedoms and employers' flexibility and benefit designs.

The individual mandate that requires that citizens buy insurance is unconstitutional. Those on the right view it as a form of socialism where the wealthy and/or healthy are required to subsidize health care costs of others against their will.

Enforcement mechanisms of the individual mandate won’t work; e.g., citizens will simply pay a penalty rather than buy insurance and drive up costs or simply find new loopholes in the law.

Government regulation in health care will lead to higher costs as a whole, since government regulation is argued to ruin a free-market system.

Higher taxes on health insurers will be passed onto individuals and companies buying in the "fully insured" market. This will lead to higher costs and kill small businesses.

It will hurt the economy through lower job creation due to increased hiring costs as a result of uncertainty.

Increases spending and costs when the government is already significantly in debt.




2010 - 2015

The Affordable Care Act has already lived a full life in its short existence. Democrats and those who support the bill have pushed hard to get it signed into law, while Republicans and those who reject it having fought it every step of the way to repeal Obamacare by fighting it as an unconstitutional law. The timeline of Obamacare below shows a brief history of some of the most significant events and important dates of the law known as the Affordable Care Act.

President Barack Obama signs into law the Patient Protection and Affordable Care Act (PPACA). Implementation of the law begins with some grandfather clause exemptions for some policies, but in many cases provisions of the law begin to affect current policies. The law begins to roll out over the next four years, with most of the actual changes to the healthcare system beginning in 2014.

After legal challenges and lots of rhetoric from a broad range of groups and states, the Supreme Court rules that the ACA is constitutional in the case National Federation of Independent Business vs. Sebelius.

Employers are required to provide print notification of employees’ ability to shop for a plan in state-run exchanges. This was deadline was originally March 2013 but it has been pushed back to October 1, 2013 for current employees. After this date, employers are required to provide notice within fourteen days of hiring.

Open Enrollment Begins for individuals and small businesses to buy health plans in the insurance marketplace. Federal and State Health Exchanges opened on this date. These markets will feature the “individual health insurance market” and “small group market” to cater to individuals and small employers, respectively. A large group market for employers with more than 100 employees won’t be available until 2017.

Many aspects of the law become effective starting January 2014. These include government subsidization of individuals up to 400% of the federal poverty line, the individual mandate, health insurance tax (HIT) to be levied on insurers, prohibition of annual limits on group health plans, etc.

Employers with greater than 50 FTE employees must offer insurance or face penalty.


Perhaps the group most interested in the impact of Obamacare being implemented is small business owners and employers. This is because small businesses traditionally not only help drive the U.S. economy, but also operate on small budgets. As a result, they need to control costs and thrive in stable environments that keep cash flow stable. Now that the question, “When does Obamacare start?” has been answered, listed below are the requirements you need to know if you’re a small business owner.

people s2-impact-ribbon
Impact of Obamacare on Small Businesses
slide slide slide slide slide slide
guy mouth

Employers with greater than 50 full time or full-time equivalent employees must provide insurance or face a penalty. This is known as a shared responsibility.

THIS MEANS that 50 employees working 30 hours is the same as 100 employees working 15 hours. This applies to owners who own multiple businesses, as employees' hours aggregate across businesses.

Penalties will be faced when at least one of your employees receives a federal subsidy to buy insurance on a state health exchange. Employers who do not offer health benefits are exempt for the first 30 employees and face a $2000-a-head penalty for the rest. Penalties are not tax deductible.

Further, if the offered plan costs more than 9.5% of the employees' income and the employee chooses a subsidy in exchange, then the penalty is $3000 per employee.

clock clock clock clock clock clock

Employers with less than 50 employees will be able to shop for insurance in the government exchanges and are not required to provide insurance.

Employers with less than 25 employees will have opportunities for tax credits depending partially on the average salary of the employees and if the employer provides health insurance. This is noted as average annual wages of less than $50,000. Employers must also pay at least half of employee health insurance premiums. This credit may be worth up to 35% of what the employer contributes towards the premiums of the employee. This increases to 50% in 2014, but is eventually phased out.

In states participating in the Medicaid expansion state employers are not required to provide coverage to low-wage employees who qualify for coverage from Medicaid. Non-Medicaid expansion state employers may still have to provide coverage to these employees.

Employers must provide a Notice of Summary of Benefits and Coverage. This notice clearly explains to employees their options regarding benefits and coverage.

Employers must provide written notice of the availability of the government-run health exchanges. This must be done by October 1, 2013. Open enrollment opens October 1, 2013.

New plans offered as of 2014 must include a set of "essential health benefits" that are sometimes excluded from current coverage. Examples of these "essential benefits" include emergency services, hospital stays, mental health and abuse services, prescription drugs, preventative care, and maternity and newborn care.

Businesses must supply employees with a summary of benefits coverage, as well as report on workers' W-2 forms the cost of company-sponsored health coverage for the previous year. This is required of employers producing 250 or more W-2s.

Employees are not allowed to contribute more than $2500 to pre-tax health flexible spending accounts. This will be adjusted for inflation in future years.