Mar 30, 2010

Health Care Reform - What Does It Mean For Small Businesses

To make sure employers play their part in ensuring more workers get health insurance coverage, the new health care law contains a combination of incentives for smaller businesses and penalties for larger businesses. Here's an overview of the main provisions that will impact businesses, as reported by Rhonda Abrams in an article in USA Today called "The good and bad in health care reform for small businesses."

Tax Credit. Small businesses with 25 or fewer employees and $50,000 or less in annual average salaries can receive a tax credit for providing health insurance for employees. For 2010 through 2013, the credit will be up to 35% of the health care premiums the company pays for its employees each tax year. The credit will go up to 50% in 2014 provided the company buys its insurance through the new small business health insurance exchanges that will begin operating in 2014.


Penalties. Starting in 2014, businesses with more than 50 employees that don't offer affordable health care options for employees would be subject to a penalty. However, according to a blog on health care reform posted by Robb Mandelbaum in the New York  Times, as bad as this may sound, it won't really affect many businesses because "Ninety-six percent of businesses in the country with more than 50 employees offer health insurance (according to the Kaiser Family Foundation). . . .And 95 percent of the 28 million small businesses in America have fewer than 50 employees."


Health Care Exchanges. Starting in 2014, Small Business Health Options Programs - or SHOP exchanges - will be established. Through these exchanges, small companies with 100 or fewer employees will be able to pool their resources so they have greater buying power. This could result in tremendous savings for these small businesses. Also acording to Robb Mandelbaum of the New York Times, supporters of health care reform legislation predict that health costs for small businesses will drop by 20 to 30% and the current inequity between what small and big businesses pay for health care will be lessened.