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Second Opinion: Do I Have To Cover My Three Employees Under Obamacare?

Second Opinion: Do I Have To Cover My Three Employees Under Obamacare

Jean Scally runs Jeanius Marketing out of her Encinitas home. She wants to grow her business from a staff of one to a staff of two or three, but she's worried Obamacare will put hiring help out of reach.

Love it or hate it, Obamacare is moving forward as law, and that means you need to get in the know about health reform now. We’re here to help. Second Opinion is a weekly Q-and-A series that answers questions from San Diegans on the Affordable Care Act. Ask yours here.

Aired 7/22/13 on KPBS News.

An Encinitas "solopreneuer" wonders whether she'll have to cover future employees' health care premiums if she decides to take on more workers.

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The Question: Do small businesses have to offer their employees health plans under the Affordable Care Act?

Jean Scally runs the marketing firm Jeanius Marketing from her Encinitas condo. She meets with clients throughout the country via a webcam in her home office. The space is peppered with personal keepsakes – signs she's a Bostonian, a rock climber, a surfer and also a "solopreneuer."

That's what she calls someone who owns and operates her business solo. Scally does it all, with help from the occasional independent contractor.

But she just scored a contract with the Las Vegas Convention and Visitors Authority and is looking to grow from a staff of one to a staff of two or three. She said she'd like to serve the local economy by hiring single moms and veterans, but she's worried she can't afford to pay their salaries and health insurance.

Here's her question:

"How does [the Affordable Care Act] impact small businesses and, specifically, businesses that might use a lot of virtual employees or part-time employees?"

The Takeaway: Businesses with fewer than 50 employees don't have to offer coverage.

The Affordable Care Act mandates that businesses with 50 or more employees must offer their workers health plans by 2015, so Scally is in the clear. Her employees would be responsible for finding and paying for health insurance themselves.

But the law does try to incentivize buy-in from small businesses with tax breaks for those with 25 or fewer employees. If Scally chooses to insure her new hires, she'd be eligible for a return of up to 50 percent of what she pays toward their premiums.

Here's how it would work:

  1. Scally would work with a private insurance broker or the state's insurance exchange, Covered California, to select a level of coverage for her employees and set the percentage of their premiums she's willing to pay.
  2. To qualify for tax credits, she must offer Covered California plans (private brokers can help with these, too) and pay at least 50 percent of her workers' premiums.
  3. Scally's employees would choose from the menu of plans she's put together.
  4. Scally would pay her portion of the premiums in a single payment to Covered California each month.
  5. Any tax credits she's eligible for would be calculated and paid out when she claims those payments on her taxes.

What will it cost her? We're not sure yet. Covered California is scheduled to release rates for its small business plans next month. But we can take a look at the math using last year's average premium for employer-sponsored plans.

  • Businesses spent an average of $5,615 per individual last year.
  • If Scally covers half of that, she'd pay $2,807.50 per person annually.
  • She'd get back up to $1,403.75 per employee.

Tax credits will vary.

The 50 percent credit used above applies to businesses of 10 or fewer whose employees make $25,000 or less a year. Generally, as business size and salary go up, credits go down. Nonprofit and tax-exempt business should also expect to see lower credits. And the tax breaks are only available for two consecutive years.

The Orders: Post those job listings.

Scally can grow her business up to 49 employees without having to worry about covering their health costs. If she wants to offer them benefits, she can call a broker or work with Covered California to find coverage starting in October.

What happens if Scally hires 50 workers? Check back next week for how the Affordable Care Act impacts businesses of 50 to 100.

Check out last week's Second Opinion: Does Obamacare cover Acupuncture and Chiropractors?

If you have a question about the Affordable Care Act, ask it at

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Avatar for user 'Fess13'

Fess13 | July 22, 2013 at 8:49 a.m. ― 3 years, 7 months ago

Really? This is a serious question? I can understand not knowing the ins and outs of Covered California, but not the simple fact that the need to provide coverage doesn't apply to someone with 3 employees. I am hoping the question was just a platform to explain how a small business employer could provide coverage if she were so inclined.

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Avatar for user 'DeLaRick'

DeLaRick | July 22, 2013 at 10:02 a.m. ― 3 years, 7 months ago


Because of all the political hysterics, it's easy to forget the substance of the ACA. Even though there isn't a lot of time left, resetting the issue and baselining facts are good ideas. Individuals will struggle to understand more than employers.

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Avatar for user 'Peking_Duck_SD'

Peking_Duck_SD | July 22, 2013 at 12:42 p.m. ― 3 years, 7 months ago

Agree with DLR - if you watch Fox "News" or read the UT "News" paper you probably have questions like:

(1) Does Obamacare mean all small business will be forced to go out of business by an executive order from Obama himself?

(2) Does Obamacare mean President Obama will knock on my door, take my medical insurance, and re-distribute it to an undocumented migrant?

(3) Does Obamacare mean that instead of using cash or debit/credit cards, we must barter for medicine directly with doctors using farm animals such as chickens? (Oh wait, sorry, that's Republican/Tea Party politician Sue Lowden who called for that

(4) Does Obamacare mean people with cancer and other life-altering conditions can be rejected by insurance companies leaving their only alternative to be "charity"? (Actually, to the contrary, Obamacare closes this loophole so insurance companyies CAN'T do this - it was despicable Republican Rep. Cantor who suggested this to a woman with growing tumors in her body:

(5) Would the Republican's healthcare plan be better or worse for me than Obamacare?
Ok, ok - this was a trick question - The Republicans don't have one.

(6) Will Obamacare spread scientifically erroneous propaganda regarding vaccines? (No, but Republican and Tea Party Caucus Leader Ms. Bachmann sure will:

"I will tell you that I had a mother last night come up to me here in Tampa, Florida, after the debate. She told me that her little daughter took that vaccine, that injection, and she suffered from mental retardation thereafter." –Rep. Michele Bachmann (R-MN), on the HPV vaccine, Fox News interview, Sept. 12, 2011

And I could go on.

And on.

And on and on and on and on with all the stupid, erroneous, shameful, cowardly lies that have been spewed by those against this healthcare reform bill.

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Avatar for user 'Peking_Duck_SD'

Peking_Duck_SD | July 22, 2013 at 12:44 p.m. ― 3 years, 7 months ago

By the way, does Michele Bachmann blame a vaccine for her own mental problems!?

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