The Patient Protection and Affordable Care Act, signed by President Obama on March 23, 2010, will benefit small businesses much more than any other group. Since 96% of all firms in the United States have less than 50 employees, anything that benefits small businesses is going to benefit a lot of families and ultimately the U.S economy too.
Tax Credits to Help Small Businesses Provide Health Insurance
The increasing costs of healthcare have hindered many small businesses from offering health insurance to their employees. Small businesses were at a disadvantage when it came to negotiating with insurance providers, since the lower number of employees gave them less bargaining power. According to the healthcare.gov site, small businesses face upto 18% higher premiums and higher administrative costs to set up and maintain a health insurance plan.
The Affordable Care Act encourages small businesses to provide healthcare for their employees by giving tax credits and making it more affordable. To qualify for a tax credit, a business or organization must have less than 25 full-time employees and the average annual wages must be less than $50,000. Also, the employer must contribute at least 50% of the total premium cost.
From 2010 through 2013, small business owners will receive up to 35% of their contribution as tax credit. From 2014 onwards this will go up to 50% of the total amount of contribution to their employee's health insurance premium. More details can be found at the IRS web site.
State-based Health Exchanges to Provide Health Insurance to Small Businesses
Starting in 2014, each state will set up Small Business Health Options Program (SHOP) Exchanges, where small businesses can shop for health insurance providers. Since the small businesses are pooling together their employees, the health exchanges are expected to reduce the premiums by as much as 4%. The exchanges will also provide web portals that make comparison and purchase of policies easier for small business employees.
The healthcare reform act will set limits on how much an insurance company can spend on administrative costs. Employees in these companies can also purchase health insurance through the Exchange for which they receive tax credits, if their employers do not provide health insurance.
At present, the cost of health insurance is quite high for small businesses and the self-employed. This discourages a lot of young adults from starting a small business and deter a lot of employees from accepting a job in a start-up. The healthcare reform will thus promote enterpreneurship by making healthcare affordable for small businesses and the self-employed.
Mariam Anthony - I am a graduate in engineering but chose to work in the financial industry. I worked for five years as an asst. manager in a scheduled ...
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