Health care exchanges: what do they mean for your small business?

Health care law and small businesses - Chris McGrath, Attorney At Law - McGrath, LLCSmall businesses (those that have fewer than 50 full-time equivalent employees) are neither required to offer health insurance to their employees nor subject to penalties for not providing it. However, the Patient Protection Affordable Care Act (or “Obamacare”) includes provisions to encourage health insurance offerings by small businesses.

Small businesses, which generally do not have the leveraging power that large corporations do, “pay 18% more than large firms for the same health insurance policy,” according to (the government website providing information about the new law).1

The law’s provisions were designed to make it more affordable for small businesses to provide insurance. According to, small businesses that offer health insurance may qualify for a tax credit of 35%. Those that offer health insurance plans to retirees may be able to receive financial help via the Early Retiree Reinsurance Program.

The Affordable Care Act has also created “health care exchanges.” A recent article in the Wall Street Journal offers a good overview of the exchanges and what they mean for small businesses. Here is an overview:

Called the Small Business Health Options Program (SHOP), the exchange is essentially an insurance marketplace. SHOP “aims to help lower insurance premiums by spreading the costs and associated risks among a large pool of participants,” reported the Wall Street Journal.2

The exchanges were designed to give small business owners the ability to offer several different insurance plans to their employees. The insurance marketplace will include plans from various insurance companies. Because the exchanges are still being put together, the insurance companies that will join, the plans that the exchanges will include, and the cost of each plan are still up in the air.

Small businesses that have 100 employees or fewer are eligible to participate in SHOP. Each state will have its own exchange in 2014. Currently, enrollment is set to start in October of this year; however, the Wall Street Journal reported that part of the program has been delayed. In early March, the White House administration released a proposed rule that would modify the program to limit small businesses to offering only one plan to employees for the first year.

As a small business owner, it’s important for you to know all your options and responsibilities under this new law. To find out more about the new health care law and how it applies to you, read my previous post (link to April’s health care law post).



About Chris McGrath

I'm a Carmel, Indiana business attorney providing business counsel, commercial litigation and mediation services based on over 20 years of experience. My firm is founded on a principle of supporting others' advancement and achievement, and my core values are service, passion, faith & loyalty.Chris McGrath's Google+ Profile