After spending decades struggling under a health care system that favors large employers, health reform will finally level the playing ground for small business owners and the self-employed so they can better attract quality workers and afford coverage for themselves and their employees.

As a small business owner, you may be confused about how health reform will impact you and your employees. I’m writing to help explain the key benefits for small businesses owners and the self-employed that were included in the recently passed health care reform legislation.

Immediate Help

Small business owners are one of the first groups that will get help immediately from health reform. Many small businesses are eligible for tax credits this year to help pay for health coverage. There are a few requirements to be eligible for the credit: (1) your business must have less than 25 full-time equivalent employees (“FTEs”); (2) the average wage of your employees must be $50,000 per year or lower; and (3) you pick up at least 50% of the cost of coverage. If you meet those requirements, then you’ll be eligible for a tax credit for up to 35% of your cost for that coverage. You can claim this credit on your annual income tax return. This credit lowers your corporate income tax liability, so if you owe very little in federal income taxes, you can’t take the credit this year but you can carry it forward. It’s estimated that 4 million small businesses are eligible for tax credits this year.

If you applied for an individual policy but were denied because of your health and have been uninsured for six months, you can get coverage through a high-risk insurance 'pool' that will make coverage available for people without such options prior to reform. If you’re insured now, new rules prevent insurers from suddenly dropping your coverage if you get seriously ill or hurt.

Addressing Costs

Right now the individual and small group insurance markets are burdened with higher administrative expenses than large group markets. This means if you’re self-employed and purchasing your own insurance, you’re getting less for your money. In the case of Humana, one of the nation’s largest insurers, in 2009 they spent almost three times as much on administrative expenses in their individual insurance business compared to large group coverage.
Starting in January 2011, insurers will have to reign in excess waste because health reform forces insurance companies to spend at least 80% of your premium dollars on actual medical care or refund you the difference. This will help ensure that your money doesn't go toward insurance company marketing, overhead, fancy corporate dinners and CEO bonuses.
In addition, insurance companies must justify rate increases. Beginning this year, all insurance companies must go through a review process and justify their rate increases. Starting in 2014, if their rate is determined unjustified, the company can be excluded from selling coverage in the insurance exchange (more on this below).

Coming soon: a new marketplace that works for small businesses

In 2014, a new simplified ‘marketplace’, or insurance exchange, will be up and running. Small business owners will find it much easier to understand and compare insurance policies, forcing insurance companies to compete on price and value. Premiums will be allowed to vary by only a few factors. This will finally give small businesses bargaining clout when they go to purchase coverage. Gone will be the old system where if one employee gets sick, the business gets quickly priced out of coverage.

And in 2014, the small business tax credits grow to cover up to 50% of the owner’s cost of providing coverage, as long as that coverage is purchased from the exchange. Note, however, this new, larger credit can only be taken for two years.

Coming soon: Help for the Self-Employed

Health reform will provide help to self-employed Americans who buy health insurance in the individual market. Starting in 2014, insurers will be banned from rejecting adults because of a pre-existing condition or charging them extra.(this protection starts in September 2010 for children.) Also, the self-employed will be able to buy coverage in the insurance exchange, where they can choose among competing policies. Finally, like everyone buying coverage through the exchange, policies will have an out-of-pocket cap of $5,950 a year ($11,900 for families).  If you’re buying on your own, individual tax credits could help make your coverage more affordable. The amount of the credit will depend on how much you make.

Through tax credits, additional consumer protection and a simpler marketplace, small businesses and their employees will get big benefits from the health reform law. As reforms are implemented, small businesses will begin to see the scales tilt more in their favor, allowing them to attract good workers and compete on a more level playing field with their larger counter-parts.

More information is available from the IRS on small business tax credits.

Does your small business benefit from these tax credits? Share your story with us.

comments (6)

They best way to make our businesses
competetive with our foreign competetors
is to enact single payer health care. This
has the potential to cut overall costs
from 18% of GDP to 9% of GDP(ie. Sweden)
That way, we would not have to compete with
companies in other countries that do not pay
for-profit companies to insure their workers.

Keep pressuring all our reps. for the choice of Improved Medicare for ALL ASAP:)

I really have to laugh when reading your column. It's almost as funny as Obama telling us all that we'll be able to keep the plans we have. While technically that might be correct, practically, it won't happen. The idea that there's any cost relief coming is also false. Most small business will not be able to qualify for the tax credit. An exchange will do nothing to relieve costs. All the benefit changes will only drive costs up. Please get your facts straight when giving this information to small businesses. They need the real scoop - not theory.

I second Ruppert's observations. The Federal Government has NEVER run ANYTHING efficiently and it NEVER will. Look at the Post Office. Look at the Veteran's Administration, Look at the effect of the red lining law. Look at Fannie Mae. Look at Freddie Mac. Look at Mr. Obama's White House Staff. Look at the White House entourage that was taken to the G-20 conference. Look at the Airport in Former Congressman Murtha's district. Look EVERYWHERE the Federal Government has gone. It's bloated, lazy, unionized, fat-cat, do nothing, bureaucracy ruins anything it touches. I am surprised that Consumers Union has fallen for Washington's drivel. Sadly, it has become a cog in the wheel of consumer disservice by looking to Washington to cure all our ills. A minimal federal government that does only the basics is all that was ever intended for good reason. Any thing else doesn't work and it will never will. Our present state of affairs is witness to that fact.

I disagree with Ruppert and Cushman. The fact is that Medicare is very popular with the people who can take advantage of it , and is 3rd in popularity (76%) among government programs behind The National Park Service (85%) and crime fighting and prevention services (77%). Social Security is 76% . As far as the Postal Service ,58% rate it very favorable and another 31% somewhat favorable as opposed to big business which is 6%.
If the Insurance cartel is so much better than the government option than why are they so afraid of it and fought tooth and nail and spent millions on getting it taken out of the health care bill? If it was really so noncompetitive it would fail on it's own without them spending a dime. The truth is, the government doesn't have to spend millions on CEO's and board of directors pay and bonuses and stock options and all the other company perks that people who are on there knees worshiping the big business gods love paying for.
The federal government also doesn't have to impress would be Wall Street investors with huge profits every year either. Check out the insurance cartel profits that we are all paying for next time you get a chance. The insurance cartel's administrative costs are about 30% higher than they are for Medicare. The tragedy is that the pulic option was lost.
The rising health care costs will just continue to rise with the insurance cartel just tacking on the increase onto everyones premiums, without any incentive to cut medical costs and the government making up for what the middle class can't afford. Eventually the government will go broke along with Medicare. And then all those clueless people who were whining about keeping the government out of their Medicare (tea party people) will get their wish. They can try and qualify for a private insurance plan if they are wealthy enough or just not have any insurance. Corporate media is always quick to point out government waste and that is somewhat true. But a lot of that waste is to pad the bottom line of private contractors that the government hires. Look at Iraq and how the private contractors took us all to the cleaners. The problem is there are few people in the government to police the fraud by these private contractors. It was all dismantled by Ronald Reagan and other right wing nuts who believed that corporations could police themselves and proposed more deregulation. That sure worked out good didn't it.

I am 46 and have been on Medicare for 10 years and let me tell all you people who love it so much (I bet $ your not on it!!) that it STINKS. First of all the nearest doctor that accepts Medicare is over 1 1/2 hours from my home. When I can get an appt it's a minimum of a 3 hour wait AND in case you were unaware, Medicare does not pay for any routine blood work (which I need twice per month because my disibility is a blood disorder!!!). THAT'S what you lovers of Medicare and Obama Care wants everyone to be "eligible" for?!?!?!?

Post a Comment (* indicates a required field)

*Name:

*Email Address:

URL:

*Comments: (you may use HTML tags for style)

*Security Code:

<<< You must enter this security code!

Remember Me? Yes No