Health Care Reform and the Not-For-Profit

(Jul, 2010)

With Congress’ passage of “The Patient Protection and Affordable Care Act” in 2009, the 8-year process of health care overhaul in the United States begins in 2010. You may not think that the “Act” is particularly applicable to not-for-profit organizations---especially smaller ones---but you would be wrong.

Starting this year, if a not-for-profit organization has average salaries of less than $50,000 they are eligible for a payroll-tax credit if they pay for more than half of their employees’ health insurance premiums. This benefit is available to organizations with no more than 25 full-time employees---a category that includes at least 65 percent of not-for-profit employers, according to a recent Congressional Research Service study.

From 2010-2013, these smaller organizations will be eligible for up to 25 percent of their premium costs. Starting in 2014, they will be eligible for up to 35 percent of the costs if they buy coverage through new state exchanges, or insurance marketplaces, for small businesses. Employers with 10 or fewer employees, with average salaries of less than $25,000, get the full credit, while those with more employees or higher salaries receive less. The IRS will provide further information on how to claim the credit.

The Act creates state-based exchanges (known as Small Business Health Options Program, or “SHOP” Exchanges) through which small businesses can pool together to spread their financial risk and buy health care coverage for its employees. If you are a small employer, stay informed about how New York State is handling a SHOP Exchange and, once the program is available, investigate whether the coverage offered can meet your and you employees’ needs at a reasonable cost. SHOP Exchanges are scheduled to be available in 2014.