How Health Reform would affect

Penelope: small-business owner, covers her employees

Penelope: small-business owner, covers her employees

Penelope, 48, graphic design shop owner, has 8 employees with annual payroll of $400,000. She provides coverage for workers but premiums have increased 10% each year; she now offers only high-deductible coverage ($5,000). Penelope is a breast-cancer survivor.

Under the Proposed Health Reform Bills:

CHOICES

  • The coverage that Penelope offers now can be continued because it is “grandfathered.”
  • Alternatively, Penelope could purchase coverage for herself and her workers through a new type of store called the health exchange, where employees will have a choice of plans. Penelope can contribute a fixed amount to her employees’ coverage and then let them pick the plan that suits them best. Her employees would then pay the balance of their premiums.
  • Small businesses would also have the option of purchasing coverage outside the exchange. Insurers who do this would have to follow the same rules as insurers in the exchange.

COSTS

  • New rules determine how premiums are set. Among other things, insurers cannot charge more due to pre-existing medical conditions or refuse to cover such conditions.
  • As more people come into the insurance “pool” and competition increases among plans in the exchange, Penelope and her employees may see their premium increases moderate over time.
  • Many small businesses will be eligible for new tax credits, but Penelope's firm pays an average salary of $50,000 and may not qualify.

DIFFERENCES

House bill (H.R. 3962, passed November 7, 2009):

  • Businesses with a total annual payroll higher than $500,000 would either have to offer coverage to workers, or pay into a fund. Penelope’s payroll is less, so she would be exempt from this requirement.
  • Small firms must have fewer than 25 employees and an average salary of under $40,000 to qualify for the new small business tax credits. Because Penelope's business has an average salary of $50,000, her firm would not qualify.
  • Although Penelope is not obligated to offer coverage at all, if offered, the coverage would have to meet new, minimum standards for coverage, including a requirement for lower deductibles.
  • The new national exchange would feature a new public insurance plan option, in addition to private options.
Senate Bill (H.R. 3590, passed December 24, 2009):
  • Employers with fewer than 50 employees (like Penelope) do not have to pay a fee if their employees avail themselves of the new tax credits for lower income families purchasing “on their own” in the exchange.
  • Small firms must have fewer than 25 employees and an average salary of under $50,000 to qualify for the new small business tax credits. Penelope might qualify, but her credit would be small as she is near the wage level cut-off for the credit.
  • The new state-based exchanges would feature new “multi-state” plan options – new, national private insurance plans regulated by a federal agency, at least one of which would be a non-profit plan.
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