Since 2010 a tax credit has been available for certain small employers providing health insurance coverage for their employees. For the first three years the maximum credit amounts remained the same. Starting in 2014 the amount of the credit increases.

Included in the Affordable Care Act enacted in March 2010, the small business health care tax credit was designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or to maintain coverage they already have.

In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

For tax years 2010 to 2013, the maximum credit was 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations.

Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations, but only if employers select from qualified plans through a Small Business Health Options Program (SHOP) Marketplace.

The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year.

Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.

For additional details about the tax credit changes, CLICK HERE.

In Ohio, the federal government is running the health insurance Marketplace, and small-business owners in the state can now start shopping for employee health insurance. Open enrollment began October 1 for coverage beginning January 1.

Although the Ohio Department of Insurance approved rate filings for six insurers in the small-group market of the exchange, only two are marketing plans statewide: Anthem Blue Cross and Blue Shield in Ohio and Medical Mutual of Ohio. The other four plans are affiliated with regional hospital systems, not in the central Ohio region.

Anthem is offering seven plans ranging from the ACA defined bronze level to the gold level with lower out-of-pocket costs. Medical Mutual is offering two plans, one silver and one gold. Both sell group insurance off the exchange for businesses that don’t qualify for the credits.

For more information about the credit and how it might apply to your business or organization, contact your Whalen tax adviser.

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