For decades, America’s small business owners have asked for more affordable health insurance coverage and more tax relief. The new health reform law — the Affordable Care Act — provides both.
First, the law offers tax credits for small employers who pay at least half of their employees’ health insurance premiums. Starting this year, businesses with less than 25 employees who make an average of $50,000 or less could be eligible for a credit of up to 35 percent of the premiums they pay on their employees’ behalf. For small nonprofits, it’s up to 25 percent. In 2014, those credits will increase to up to 50 percent and 35 percent, respectively.
Also in 2014, health insurance exchanges for small businesses will open in every state.
Having been a small business owner for over 30 years, I know the value of providing quality health care coverage to employees — while at the same time appreciating the burden of ever-escalating costs. These tax credits shift the equation to benefit both businesses and employees.
Small businesses now pay as much as 18 percent more than large firms for the same health insurance coverage. Exchanges will allow businesses with as many as 100 employees to pool their risk together, lower their administrative costs and negotiate more effectively with insurance companies. According to the Congressional Budget Office, this could help drive down premiums by as much as 4 percent in the marketplace of small business health plans.
The tax credits and exchanges are just two of the new tools that will help small businesses offer health insurance, some for the first time.
Even if a small business owner with 50 or fewer employees decides not to buy health insurance with these incentives, there’s no penalty. They’re exempt from the employer responsibility provision of the new law. In this case, small business employees will be able to use individual tax credits to shop for insurance in the exchanges.
It’s important to note, by the way, that 96 percent of businesses with more than 50 employees already offer health insurance coverage.
Finally, the new law will go a long way toward strengthening America’s entrepreneurial spirit overall.
For example, it will prohibit insurance companies from denying coverage based on pre-existing conditions, giving more Americans the ability to break out of “job lock” and start their own ventures. Prospective entrepreneurs shouldn’t be held back just because they fear losing their employer-sponsored coverage. The new law also will prohibit insurance companies from dramatically increasing premiums for a small business just because one worker gets sick.
Overall, the Affordable Care Act is a critical tool that will help millions of small business owners provide health insurance to people who they often consider to be members of their extended family — their employees.
As a nation, we owe them nothing less as they work to grow, create jobs and lead us toward full economic recovery.
More information about the Affordable Care Act is available from the Web site at www.healthcare.gov.
Daniel Hannaher, the U.S. Small Business Administration Region VIII administrator, works out of Denver. Reach him by e-mail at Daniel.Hannaher@sba.gov