How the New Healthcare Bill Will Affect Small Businesses

The new healthcare bill will have a big impact onhealthcare costs, small companies may find it
small companies. As changes are implemented asmore affordable to pay the penalty taxes than to
early as this year, small companies, from 10 toprovide coverage for employees.
100 employees, will find that when it comes toSmall companies that offer coverage could pay
healthcare reform, it's anything but business ashigher taxes for subsidized employees
usual.• Companies with more than 50 employees
There are many pros and cons of the newthat do offer coverage will pay a higher tax
legislation for small companies, depending on thepenalty, but only if they employ low and
company size, annual payroll and employeemoderate-income individuals who qualify for and
income. It is most interesting that companies withaccept premium subsidies. Employers will pay the
26-49 employees are not eligible for tax creditslesser of $3,000 for each person receiving
or required to provide healthcare coverage forpremium subsidies or $2,000 for each full-time
less than 50 employees, potentially slowingemployee.
employment growth for the smallest companies.Cons: This tax penalty would discourage some
To help small companies make the transition, thecompanies from hiring low-income workers who
Healthcare Commissioner and Small Businessreceive subsidies, leading to job discrimination and
Association will provide counseling, technicalincreased employer costs.
assistance, information on available affordabilityCompanies with less than 50 employees are not
credits, and enrollment and plan selectionrequired to provide coverage
assistance to small companies participating in the• Companies with less than 50 employees will
health insurance Exchange.be exempt from the above penalties.
Companies that elect to offer coverage throughPros: The smallest companies will save thousands
their own group insurance plan before 2013 willof dollars on healthcare coverage.
have a 5-year grace period before they mustCons: The smallest companies may not be able to
meet the same requirements as government runafford to grow beyond 50 employees.
Qualified Health Benefits Plans. Premiums for theseSmall companies will be able to pool together to
plans can be increased for risk groups, but only ifbuy insurance
they are increased for all enrollees in same risk• By 2014, companies with less than 100
group.employees (less than 50 in some states until
Pros and cons of the new health care bill for small2016) will be able to pool together and buy health
companies:insurance through state run Small Business Health
Tax CreditsOptions Programs, or "SHOP Exchanges."
The smallest companies with the lowest wagePros: These Exchanges are predicted to save
workers will get the biggest tax creditsmall businesses 1%-4% in insurance costs and
• In 2010, companies with less than 10are more affordable than the public health
employees who make an average of $25,000 ainsurance Exchange for employees.
year could get a 35% tax credit.Cons: If employers choose not to provide
Pros: The smallest companies will need the mostcoverage, they must pay the Health Choices
help.Commissioner (the head of the SHOP Exchange)
Cons: The smallest companies with the lowestthe following applicable taxes based on annual
wage workers will get the biggest credit.payroll:
Smaller companies will have to pay at least 50%Does not exceed $250,000.................................... 0 percent
of employee premiums to receive creditExceeds $250,000, but does not exceed
• 2010-2013, companies with less than 25$300,000 2 percent
employees who make an average of less thanExceeds $300,000, but does not exceed
$50,000 a year can earn a tax credit of up to$350,000 4 percent
35% year if they contribute at least 50% of theExceeds $350,000, but does not exceed
total employee premium cost or 50% of a$400,000 6 percent
benchmark premium. Tax-exempt smallSmall companies can receive the largest tax credit
companies that meet these requirements canfor purchasing coverage through the Exchange
earn credit up to 25%.• 2014-2016, small companies that purchase
Cons: This may not provide enough incentive forcoverage through a state Exchange can earn a
small companies to provide coverage.tax credit of up to 50% if they contribute at
Most small companies do not get a tax breakleast 50% of the employee premium cost.
• Companies with more than 25 employees areTax-exempt small companies that meet these
not eligible for a tax credit.requirements can earn credit up to 35%.
Healthcare CoveragePros: SHOP Exchanges may provide an affordable
Small companies with 50 or more employees willoption and encourage small companies with less
have to provide coverage or paythan 50 employees to offer coverage.
• Beginning 2014, companies with 50 or moreCons: Smallest companies with less than 50
employees must provide at least 60% of overallemployees, with an annual payroll between
employee healthcare costs, including 72.5% of$250,000 to $400,000 per year, will pay a tax if
individual and 65% of family coverage costs.they do not contribute to the SHOP Exchange.
Companies that do not provide coverage, throughIn summary, small businesses will have to make
their own plan or public Exchange, and have atsome big decisions about providing employee
least one full-time employee who receives ahealth care coverage. The feedback from many
premium tax credit, must pay a $2,000 annualsmall businesses is that it may be more
fee for each full-time employee, excluding theaffordable to pay the government imposed fines
first 30 employees from the fee. This means aand drop their existing employee health plans. With
company with 51 employees would pay a $2,000this in mind, perhaps the more important question
annual fee for each of their 21 employees.to ask may be, "How will the new healthcare bill
Pros: With a majority of small companies paying inwill affect employees of small businesses?
excess of 10% of annual operating expenses for