The most comprehensive health-insurance reform since Medicare is now the law of the land. The Patient Protection and Affordable Care Act (PPACA), signed into law by President Barack Obama, touches every aspect of U.S. healthcare.

First, know that no employer is required to provide health insurance. However, some employers will pay penalties if they do not provide insurance and their employees buy insurance from the new statewide insurance pools.

Here’s some good news: The PPACA “is really looking out for the smallest of small businesses,” says Shawn Nowicki, director of health policy at New York Business Group on Health (NYBGH), a coalition of 175 employers, unions and healthcare providers in New York state, Connecticut and New Jersey (

How so? Right out of the gate, the bill provides a tax break. If your answers to these three questions are “yes,” you may well receive a tax credit of up to 35% of your contribution toward your employees’ health insurance, now through 2013. The credit will increase to up to 50% for tax year 2014 and 2015.

  • Do you have 25 or fewer full-time employees?
  • Are their average annual wages below $50,000?
  • Do you contribute more than 50% of your employees’ total premium costs?


For this year through 2013, the full tax credit is available to employers with fewer than 10 employees whose average annual wages are less than $25,000. The tax credit gradually scales down as workforce sizes and average wages increase.

Here’s an example. Suppose your operation employs 10 full-time workers with an average wage of $25,000. If your annual employer healthcare costs are $70,000, you are entitled to a $24,500 credit each year for 2010 through 2013. Starting in 2014, the credit will be $35,000.

For some help calculating your own credit, see the guidance recently posted on (Search for “Small Business Health Care Tax Credit” including the quotation marks.)

Businesses with 50 or fewer employees benefit from another tax-related benefit: They may opt out of providing insurance with no penalties. Got more than 50 employees? You are not required to offer health insurance. However, if you opt out and one or more of your employees goes to the new state insurance pools to purchase coverage, you will pay $2,000/full-time employee, excluding the first 30 employees from the assessment.