What Health Care Reforms Means to You

Only 45% of America’s smallest firms currently can afford to offer health care benefits. In fact, 60% of America’s uninsured—or 28 million—are small business owners, workers, and their families. Health care reform helps small businesses afford coverage for owners and employees.

Health Insurance Exchange

The health care reform bill provides small businesses the same access to quality, affordable coverage that large firms have today.  Beginning in 2014, the bill creates state-based Health Insurance Exchanges to make health insurance affordable and accessible for small businesses and the self-employed.  By being given the ability to join a large pool, small businesses will now have access to the same types of quality, affordable coverage that only large firms have today.

Small business employees will be able to do one-stop comparison shopping for transparent, affordable insurance plan that offers:

•    Lower rates that currently only large groups and firms get,
•    Stable pricing from year to year,
•    Lower administrative costs, and
•    A choice of quality plans.

Insurance companies are currently permitted to charge higher health insurance premiums because of employee health status. Small businesses pay higher rates today because they do not have the advantage of large numbers of employees over which to spread insurance risk. This will end with the ability for small businesses to enter into the Exchange.  

Tax Credits will help small businesses and employees afford coverage

The bill provides $40 billion in tax credits for small businesses to help them offer employee coverage, which began immediately when the bill was passed in 2010.  Approximately 15,700 small businesses in western Wisconsin will be able to afford coverage with the help of these tax credits.

The bill provides a sliding scale tax credit to small businesses with fewer than 25 employees and average annual wages of $50,000 or less that purchase health insurance for employees. The full credit will be available to employers with 10 or fewer employees and average annual wages of $25,000 or less. To be eligible for a tax credit, the employer must contribute at least 50% of the total premium cost.

The small business tax credits will phase in. For 2010 through 2013, eligible employers will receive a small business tax credit for up to 35% of the employee’s premium. For 2014 and later, once the Health Insurance Exchanges are up and running beginning in 2014, eligible employers who purchase coverage through the Exchange for their employees can receive a tax credit for two years of up to 50% of the employee’s premium.

Tax Credits will help employees of small businesses afford coverage

Tax credits will also make coverage affordable for many small business employees who do not receive insurance through their employer (who thus enter into the Exchange to find independent coverage).  These tax credits will help many small business employees who currently find health coverage simply unaffordable finally be able to purchase coverage for themselves and their families.

Shared Responsibility Requirement

Under the health care reform bill, a vast majority of small businesses are exempt from the shared responsibility requirement.  For small business across the country, providing employee health coverage is simply unaffordable.  For this reason, the bill exempts all small businesses with fewer than 50 employees from the bill’s shared responsibility requirement, which begins in 2014. This means that, under the bill, 96% of America’s businesses will be exempt.  

Starting in 2014, small business employees will have access to a Health Insurance Exchange.  In the exchange, employees will have access to multiple insurance plans and where they can come together to purchase the health care plan of their choice with tax credits to make it affordable.

The exchange gives small businesses the group purchasing power of a big business to get lower prices and better quality coverage.  

The shared responsibility requirement is only for firms with 50 or more employees. Under the bill, beginning in 2014, employers with 50 or more employees that do not offer health insurance coverage will pay an assessment of $2,000 per full-time worker if any of their employees obtain premium tax credits through the Health Insurance Exchange.

However, to avoid disincentives to hire an additional employee above 49 employees, the bill subtracts the first 30 employees from this payment calculation.

Tax Credit Calculator

Use this calculator to determine, as a small business, what your tax credit would be.