Small Businesses May See Some Relief in the
New Health Care Actby Mary Louisa by L’Hommedieu, Esq.
The new Health Care Act will affect nearly every small business. The main provisions of the Act roll out over the next four years, with the major changes occurring in 2014. Most notably, beginning in 2014, businesses with more than fifty employees (or full-time equivalents) must provide affordable health insurance for their employees or face penalties. Businesses with fewer than one hundred employees will be permitted to participate in insurance exchanges, to be set up in each state, where a pooling of resources should drive the costs of insurance down. And while small businesses are not required to offer insurance for their employees, the Act provides strong incentives for them to do so.
Until the Small Business Health Options Programs - or SHOP insurance exchanges become operational in 2014, states are required to create federally funded programs to offer affordable insurance. During this period, there are a number of incentives for small businesses to participate:
Immediate Tax Credit for Small Businesses. From 2010 to 2013 (before the implementation of insurance exchanges in 2014), small businesses can receive a tax credit for providing health insurance for employees if the business contributes at least half of the cost of the health insurance premiums. Eligibility depends on the number of employees and the average salaries. In general the credit will only be available for those businesses with twenty five or fewer employees and where the employees earn an average of $50,000 or less. For the purpose of the tax credit, owners and their close relatives are not counted as employees for meeting eligibility requirements, and their health care expenses cannot be offset by the credit. The credit will go up to 50% of premiums paid in 2014 if the company buys its insurance through the SHOP insurance exchanges.
Immediate Access to Health Coverage for the Uninsured with Pre-existing Conditions. In June, 2010 the Act will create federal funding for state programs to offer affordable coverage to uninsured Americans with pre-existing conditions. This program will last until the SHOP insurance exchanges become operational in 2014. In addition, the Act prohibits your existing health plan from excluding coverage for children with pre-existing conditions. Starting in 2014, this provision will apply to adults as well.
Health Care Exchanges. Starting in 2014, the SHOP insurance exchanges will begin operations allowing smaller companies, those with 100 or fewer employees, to participate. This pooling of resources should offer members greater buying power, and thus, greater savings. In addition, businesses buying insurance through an exchange will also be eligible for a tax credit of fifty percent of premiums paid, on a sliding scale. The full credit will be available to businesses with the equivalent of ten or fewer full-time workers, where those workers are paid, on average, less than $25,000. The benefit phases out as the payroll grows to twenty-five full time workers and wages rise to $50,000 on average. Seasonal workers are not included in these calculations.
Insurance for the Self-Employed. Also starting in 2014, a self-employed person whose business earns under $50,000 per year (net) may purchase insurance through SHOP exchange, where they will not be subject to discrimination based on pre-existing conditions. In the meantime, by June 21, 2010, each state is required to create and implement a new, temporary program to provide coverage to people with pre-existing conditions at a “standard rate.”
The new law will be paid for, in part, by a payroll tax increase on individuals earning more than $200,000, and families earning more than $250,000. But the law specifically exempts income earned by individuals running small, closely held businesses. The success of the plan will be largely dependent on the implementation, which will require coordination between the State and Federal governments. As a number of States have already filed lawsuits to halt the implementation, that coordination may be difficult to accomplish.
Mary Louisa L’Hommedieu is a partner in the Health Care and Business & Corporate Practice Groups at Meyers, Roman, Friedberg & Lewis, a law firm in Cleveland, Ohio.
