As you’ve doubtless heard, on Thursday the U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act, also known as Obamacare. This means that unless Congress overturns the law, it will take full effect over the next several years.
What does this mean to you? The most significant change created by the new law is the requirement that all Americans have health insurance coverage by 2014. Currently, there is no federal law requiring individuals to have health coverage; nor are employers required to provide it for their employees.
This is all scheduled to change starting in 2014. By that year, all Americans must have at least minimal health coverage or they will have to pay a penalty to the Internal Revenue Service. To help everyone obtain coverage, starting in 2014, health insurers will not be allowed to deny coverage because of pre-existing medical conditions.
The mandatory health coverage requirement will affect all businesses, large and small. But they will be affected in different ways.
Larger employers — those with 50 or more full-time employees — will be required to provide their employees with minimum health coverage or pay a penalty to the IRS.
Owners of smaller businesses with fewer than 50 employees will not be required to provide health coverage to their employees. But, to encourage them to do so, the law entitles small businesses with 25 or fewer employees to a substantial health care insurance tax credit until 2016.
Because of these changes, for the first time, starting in 2014, all small business owners will have to have at least minimal health insurance coverage for themselves and their families or pay a penalty to the IRS. This is true whether you’re a self-employed sole proprietor, partner in a partnership or limited liability company, or employee of your own small corporation.
For most taxpayers, the annual penalty for each family member (up to three) will be $95 in 2014, $325 in 2015, and $695 in 2016 and later. The penalty is not applicable to people who can’t afford coverage. Moreover, the IRS has been given very limited legal tools to collect the penalty from those who refuse to pay it. It’s likely that many people who fail to obtain health insurance will not be penalized at all.
To help individuals and small businesses be able to afford health coverage, each state will be required to establish a health insurance exchange by 2014. These exchanges will be a competitive insurance marketplace where small businesses and individuals who might not otherwise be able to afford it, can buy qualified health benefit plans.
The exchanges will offer a choice of health plans that meet certain benefits and cost standards. To help lower-income people obtain coverage, a refundable premium assistance credit will be available for those who purchase health insurance from a state exchange and whose income is between 100 percent and 400 percent of the federal poverty line.
Thus, if, like most real estate professionals, you’re a self-employed sole proprietor, the establishment of these health insurance exchanges may help you obtain cheaper health insurance.
For more information on the health care reform law, see www.healthcare.gov.