What the Affordable Care Act Means to Family Child Care

Here's what the Supreme Court ruling on the Affordable Care Act (ACA) means to family child care providers:

As an Employer

1) Before the ACA family child care providers who hired employees were not required to offer health insurance to their employees. Under the ACA, starting in 2014, employers who have more than 50 employees will be required to offer health insurance to their employees or pay a penalty. Since family care providers do not have more than 50 employees, this will not affect them. Therefore, there continues to be no requirement that child care providers offer health insurance to employees.

2) You can choose to offer health insurance to your employees if you want. If you do, there are some federal tax credits that can help make this more affordable. In 2012 and 2013 there is a 35% tax credit if you pay more than half the cost of health insurance premiums for your employees. In 2014 this will rise to a 50% tax credit. The cost of premiums not covered by the credit continue to be a 100% business deduction.

For example, let's say you had one employee and purchased health insurance that cost $5,000 a year. You decided to pay $4,000 of the premiums and required the employee to pay the other $1,000. For 2012 you would get a $1,400 tax credit ($4,000 x 35% = $1,400) and could also deduct $2,600 ($4,000 - $1,400 = $2,600) as a business expense. Child care providers who decide to hire their spouse or their own children might want to take advantage of this tax credit.

As a Consumer

1) Health insurance has become increasingly difficult to afford for many family child care providers who are single or not covered by their spouse's health insurance plan. Under the ACA it should be easier to access more affordable health insurance. Beginning in 2014 you will be able to shop for more affordable health insurance coverage for your family (and your employees) through state-run insurance exchanges.

Under the ACA, these exchanges will not offer health insurance but will rather offer a one-stop shop for health insurance plans offered by private insurance companies. This will make it much easier to compare benefits and prices. Insurance companies will not be able to refuse to insure you because of your health history.

2) Beginning in 2014, if you are not low income, you will be required to either purchase health insurance or pay a small penalty. The annual penalty (tax) is $95 for an adult and $47.50 for a child, or up to 1% of your income (whichever is greater). This will rise to $695, or 2.5% of income by 2016. This is the individual tax; families have a tax of $2,085 or 2.5% of income whichever is greater. Low-income individuals and families will be eligible for subsidies if their income doesn't exceed $14,404 or individuals and $29,326 for a family of four. These income eligibility numbers will likely rise after 2014.

Let's say that in 2014 you refuse to purchase health insurance, you are single and your profit is $30,000. Since 1% of your income is $300 ($30,000 x .01 = $300), that is greater than $95, you will owe a tax of $300. There are currently no rules that allow the IRS to enforce this tax.

Low income individuals and families who would have to pay more than 8 percent of their monthly inncome for health insurance would not be required to purchase health insurance.

Bottom Line

If you have health insurance that you want to keep, the ACA will not force you to change policies. The fear of losing health insurance or being unable to pay medical bills has haunted many family child care providers for years. The implementation of the ACA over the next two years will make major changes in how we buy health insurance. It will become easier to get health insurance, the insurance will cover more and in the long run cost less than if the law did not exist.

Here's an article: "How Can You Deduct Family Medical Expenses?"

Image credit: chicagonow.com

Comments

[Dkanebarnhart]

The ACA now also allows for the non-dependent child, not going to school to, not offered health insurnace by his employer to be covered on his parents plan until the age of 26. This is wonderful in my eyes as my son is 22 working and not offered insurance by his employer. He has needed the insurance twice in the past year since ACA was passed and we were able to put him on my spouses employer's healthcare insurance. He would be in such overwhelming medical debt right now without ACA.

[Jennifer Pishny]

Thank you for such a great article!