The U.S. Supreme Court in King v. Burwell, has ruled the tax subsidies for health insurance provided by the federal government to citizens in the 34 states that have not established the health insurance marketplaces or exchanges were legal. That means, some 6 million people, including the nearly 3.5 million people in small-business plans and small-business owners, self-employed professionals, and early retirees who depend on subsidized health care costs, will continue to receive them under the Affordabale Care Act (ACA).

Unfortunately, despite those subsidies and other tax incentives, healthcare costs continue to skyrocket. And, according to a report from the Urban Institute, a Washington DC-based think tank, small businesses are among those most vulnerable to the steep healthcare cost increases.


Everyone must have basic health insurance that meets the government standards, and some large businesses must provide their workers with that coverage. The ACA provides operators and their car care businesses with a number of options — and an overwhelming amount of confusion and paperwork. What can a car wash operator do to keep healthcare costs manageable while complying with the ACA’s ever-changing rules?

First, it should be understood that the ACA’s taxes and tax credits are based on the number of full-time equivalent employees (FTE) and their average annual wages, not solely on the number of full-time employees. In simple terms, FTE or “full-time equivalent” equals (the total number of full-time employees) plus (the combined number of part-time employee hours divided by 30). Seasonal employees, contractors, and business owners don’t count toward the total.


Much of the ACA’s negative press stems from the looming “Employer Mandate,” the requirement that businesses with over 50 full-time equivalent employees must provide health coverage to full-time employees. Although the reports of employers cutting hours or firing workers along with more radical claims were often over-dramatized, the negative side of the ACA is all too real. Fortunately, there is another side to the story.

Of those that are required to comply, only truly large businesses that don’t currently offer benefits and employ many low wage full-time workers, face truly hard decisions. Those businesses offering higher wages typically already provide benefits, while smaller businesses (with between 50 and 100 FTE) will benefit greatly from not owing the Employer Mandate’s penalty fee, officially called the “employer shared responsibility fee,” that penalizes small businesses that don’t cover their full-time workers a whopping $2,000 per employee.


It’s safe to say the smaller the business the better the tax breaks. After all, the ACA provides small car wash operators with affordable insurance options, cost assistance, and increased buying power via the Small Business Health Options Program (SHOP). Small businesses with fewer than 50 FTE employees can use the SHOP to get better deals on employee insurance, but aren’t mandated to do so.

Consider a few of the ACA’s other rules:
• Small car wash or detailing businesses that do provide healthcare coverage can see up to a 50 percent reduction in their share of the cost. Employers with fewer than 25 FTEs, paying average annual wages below $50,000, qualify for tax credits to help pay employee healthcare premiums. Employers with 10 or fewer full-time employees, paying annual average wages of $25,000 or less, qualify for the maximum credit of 50 percent. The amount employers do pay is tax deductible and can be carried forward or backward.
• Form 8941, Credit for Small Employer Health Insurance Premiums, must be filed to claim the tax credit — all the way back to 2010 since the credit is retroactive.
• Along with tax credits and increased buying power, many car wash businesses may now be able to provide benefits to their employees. Thanks to the ACA, employers can offer more and better quality benefits. In fact, because small businesses are able to shop for group health plans on their State’s Health Insurance Marketplace via the SHOP, a car care service business now has the same buying power as larger businesses.
• The self-employed with no employees can get health coverage through the Health Insurance Marketplace for individuals, but not through SHOP.
• Don’t forget there is an additional cost for some small businesses — a $63 pre-existing conditions fee. That’s right, for some employers purchasing insurance, there is an annual $63 fee. The ACA small business fee decreases each year until 2017 when pre-existing conditions are phased out.
• Retroactive to January 1, 2014, and through at least 2015, 2 percent shareholders in a car wash operating as an S corporation can receive reimbursement for their individual health insurance premiums. Even better, the S corporation will not be subject to the excise tax penalty if it correctly includes the health insurance premiums on the 2 percent shareholders’ W-2. The 2 percent shareholder must report the income as wages, but will be allowed to take a self-employed health insurance deduction. But, beware the $100-per-day penalty.
• Last year, many small employers were shocked to learn that employee payment plans, plans under which they reimbursed employees for the cost of obtaining individual health insurance, violated the ACA rules. More than a few small businesses use a so-called Employee Payment Plan to help defray health insurance costs for their employees, as do some S corporations that reimburse shareholders owning more than 2 percent of the company. Unfortunately, doing so can subject an employer to a penalty of $100 per day, per employee up to a maximum of $500,000.

Taking effect on July 1, 2015, the rule covers employers with more than one employee participating in an employer healthcare/coverage payment arrangement. Employers can exclude workers who 1) have fewer than three years of service to the business; 2) are under age 25; and 3) are part-time or seasonal employees. The $100 a day fine applies for all other employees covered by the payment arrangement. S corporations are exempt through the end of 2015.

Several small business groups are trying to change the law and there are bills in Congress that would do so, but until then everyone should be aware of this very costly provision of the ACA.


The Medicare Part A tax is paid by both employees and employers. Often overlooked however, is the fact that an operator or car wash business with profits over $250,000 faces a .9 percent increase (from 2.9 percent to 3.8 percent), on the current Medicare part A tax.

Since this tax is split between the employer and employee, they will both see a .45 percent increase. Small businesses making under $250,000 are exempt from the tax. Employees making less than $200,000 as an individual, or $250,000 as a family, are also exempt.


On the horizon is an excise Tax on High-Cost Plans (also known as the “Cadillac Tax”) that kicks in for employers starting in 2018. Employers may have to pay up if their group health plans exceed a certain dollar limit. The limit for 2018 is $10,200 for individual coverage and $27,500 for family coverage.

For self-insured plans that exceed these limits, the employer will pay a 40 percent nondeductible excise tax on every dollar above the limit. This penalty can be significant even for a plan that exceeds the limits by only a few hundred dollars per year, making now the time to think about changing an existing plan.


The self-employed operators and workers in small businesses such as car washes have, at least since late 2013, been able to buy subsidized individual health insurance plans on government-run exchanges. The subsidies, available to anyone who earns between 100 and 400 percent of the poverty level, have helped reduce the cost of insurance — at least until recently. Of course, small-business owners, self-employed professionals and early retirees still buy individual healthcare policies directly from an insurance company, bypassing the marketplaces and paying the full cost.

Finally, let’s not forget the owners of car care service businesses. The number one benefit of the Affordable Care Act for self-employed car wash operators is that they can now afford their own health insurance. In fact, thanks to the ACA, 83 percent of currently uninsured small-business owners became eligible for healthcare coverage.

Many car wash operators and small business owners who currently buy their own individual healthcare coverage in the private market may be eligible to take advantage of new tax savings as well. Unfortunately, for many, insurance is more expensive than ever.

While supporters of the ACA tout its success in providing insurance to millions of Americans, escalating insurance costs have already begun impacting many car wash businesses as well as those who do not qualify for subsidies and others who buy health insurance directly.

In recent weeks, large insurers selling coverage under the ACA have proposed massive rate increases for 2016 — some exceeding 40 percent — because they haven’t been able to sign up enough young and healthy customers.

Keeping abreast of the many benefits and potential pitfalls of the ACA is important, but it is the skyrocketing cost of healthcare that makes professional guidance a necessity for every car wash business — and its owner/operator.


Mark E. Battersby is an Ardmore, PA-based freelance writer, specializing in finance and tax issues.