The Supreme Court ruled this past summer upholding the constitutionality of the Patient Protection and Affordable Care Act (often called “Obamacare”). So in 2013, the Act will proceed forward into implementation. Many small-business owners are wondering what this mega-document holds in store for them in the coming years.

An insurance study was conducted by the Kaiser Family Foundation to determine the potential impact of the act on small-business owners. One of the things investigated was the source of small-business owners’ (fewer than 25 employees) medical coverage. They determined that owners are in the same boat as their employees with 25% being uninsured, half relying on spousal coverage and the remaining 25% purchasing private insurance policies. That is — if they qualify and can afford them.

The 2012 National Survey of Employer-Sponsored Health Plans predicts a 6.5% rise in health care cost in 2013. Some of this cost will likely be passed on to employees, according to George Lane, principal at Mercer, the human resource consulting company that conducts this annual study. The study also found that small-business employers are three times as likely to cancel insurance coverage than larger companies that will face penalties. Penalties will not apply to companies with fewer than 50 employees.

What to Expect

The following will be implemented in 2013 and may affect small businesses:

  • High income earners: If you earn more than $200,000 and are single (or $250,000 for a married couple), then you will be required to pay a 3.8% Medicare contribution tax for 2013, which applies to investments, royalties, and rental income.
  • Tax credit: Employers who provide insurance will qualify for a 35% tax credit of their contribution toward employee coverage. The credit is calculated based on number of employees and their earnings. The tax credit increases to 50% in 2014.
  • Exchanges: The exchanges will allow individuals and small businesses to shop for competitive health insurance coverage online — a one-stop shop option. Exchanges are set to begin Oct. 1, 2013. The target date for all states to have their exchanges ready is Jan. 1, 2014.
  • W-2 forms: The W-2 tax form filed in 2013 for 2012 must include a line showing benefit amounts the employee received from employer-sponsored health care. This could increase the cost of tax preparation since the added information will require additional time for your accountant.
  • Flexible spending accounts cap: There will be a new federally regulated cap of $2,500 on FSAs in 2013 limiting the use of such accounts for out-of-pocket medical expenses such as high deductibles. The cap only applies to new FSAs implemented after Jan. 1, 2013.

Kathy Shertzer is office manager at Dukate Fine Remodeling, in Franklin, Ind.

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