On Tuesday, March 23, President Obama signed a landmark health care bill into law that, among its many goals, seeks to ease health insurance costs for small businesses. Following passage of the bill by Congress on Sunday night, the Small Business Majority released a summary of the measures in the health care bill that will affect small businesses.
On Tuesday, the Small Business Majority (SBM) e-mailed small business owners reporting that it had put together a detailed look at the small business provisions in the health care bill, "What's in Health Care Reform for Small Businesses?"
In the four-page report, SBM stressed that the legislation that "will fix the serious problems that small businesses, including the self-employed, face in the current health care system: skyrocketing costs and unpredictable premiums, lack of access to affordable coverage and choice among health plans, and administrative inconvenience and hassle."
The health care law will be implemented over a five-year period (2010 - 2014) to avoid disruption to the existing system and to make transitions as smooth as possible, the report noted. "The general approach is to build upon the existing employer-based health system that employers and employees are used to: insurance will still be purchased from private insurance companies -- although not-for-profit plans will be available -- and the private sector health system of doctors, hospitals, and other providers will be maintained. Medicare will still cover retirees and Medicaid will continue as it does currently to cover uninsured children and low-income adults."
Among the highlights of the bill, SBM states, health care reform offers ahealth insurance exchange that will create a pool of small businesses with up to 100 employees and the self-employed. The exchange will enable insurers to offer lower premiums as a result of lower administrative costs. The larger pool will also dampen the annual volatility of premiums and create more insurer competition, thereby increasing affordable insurance options.
The bill will also provide small business tax credits. The tax credit is estimated at $40 billion from 2010 to 2019, an average of $4 billion per year over the 10-year time span, SBM noted, and approximately 3.6 million small businesses will qualify in 2010 for the tax credit to offset employer health plan costs.
In addition, beginning in 2010 and continuing through 2013, the SBM paper reported, businesses with fewer than 25 full-time employees that contribute at least 50 percent of the total premium will be eligible for tax credits of up to 35 percent of the employer contribution. The full credit will be available for businesses with fewer than 10 employees averaging less than $25,000 annual wages, and will phase out at $50,000. Nonprofit organizations will qualify for tax credits of up to 25 percent of the employer contribution during this time period.
Beginning in 2014, eligible small businesses purchasing coverage via an exchange will receive tax credits of up to 50 percent of the employer contribution if the employer provides at least 50 percent of the premium cost. Nonprofit organizations will qualify for tax credits of up to 35 percent of the employer contribution during this time period. Seasonal employees will not be counted when determining eligibility. A business can claim the credit for any two years in the future. The law explicitly excludes sole proprietorships and family members from the small business tax credits (but they can apply for individual tax credits).
The legislation will also increase the choice of health plans -- including health co-ops and new multi-state health plans -- through an insurance pool (exchange) offered to employees of small businesses, the self-employed and other individuals.