You love owning a small business. You love being your own boss after working for a large corporation for more than 10 years. You love making quick decisions that quickly put money in your pocket rather than offering ideas that will enrich your bosses if they are accepted.
Unfortunately, your business has growing pains. You pay employees well, but you don’t offer health insurance because small businesses pay about 18 percent more than large businesses for the same policy, according to the U.S. Department of Health & Human Services. This decision has made recruiting and retaining top-notch employees difficult. At home, your spouse worries about your family’s health insurance. You’re now wondering about your future. You’re not alone. Roughly 40 percent of businesses survive five years, according to Small Business Trends. What should you do? The solution might be in the Affordable Care Act. Currently, roughly 98 percent of companies with at least 200 employees offer health insurance, according to the Kaiser Family Foundation’s Employer Health Benefits Survey. By contrast, 73 percent of companies with 10 to 24 employees and half of companies with three to nine employees offer health insurance. The Affordable Care Act’s provisions for small businesses address this disparity. They include:
* TAX CREDITS: If your small business has 25 or fewer employees whose average annual wages are below $50,000, you can get a tax credit that will partially offset your health insurance costs. Currently, the small business tax credit is up to 35 percent of the insurance costs. In 2014, it increases to up to 50 percent of the costs.
Small businesses with 10 or fewer employees whose average annual wages are below $25,000 are eligible for the maximum credit. The IRS estimates that an auto repair shop with 10 employees with an average salary of $25,000 will pay $70,000 on health insurance in 2014 and get a $35,000 tax credit.
Www.irs.gov tells you whether you qualify for the credit. The U.S. Department of Health & Human Services estimates that 4 billion small businesses will qualify for tax credits in 2013. * CHANGES FOR INDIVIDUALS: The Kaiser Family Foundation’s survey indicates that changes in the individual insurance market will affect small business owners more than changes in the small business insurance market because one in four small business owners have no health insurance.
The changes in the individual market are particularly beneficial to people with pre-existing health conditions. They’re guaranteed health insurance that limits premiums caused by pre-existing conditions. The Affordable Care Act also limits how much premiums increase as you age and requires insurance companies to cover “essential benefits,” including ambulance services, hospitalization, care for newborns, prescription drugs, preventive care, mental health care, dental care and vision care.
Businesses with fewer than 50 employees are not required to offer insurance.
* HEALTH INSURANCE EXCHANGES: Effective Jan. 1, 2014, small businesses with 100 or fewer employees will be able to buy health insurance via Small Business Health Options Program (SHOP) health exchanges. These exchanges are marketplaces where insurance companies will compete to sell “qualified” health plans. A Congressional Budget Office report projected that the exchanges will reduce small business premiums by up to 4 percent.
Government officials will appoint health insurance experts to decide which plans are qualified and rate the plans so small business owners can easily compare the plans’ benefits. Small business owners will also rate the plans via satisfaction surveys so other owners can make better decisions.
Terry Gardiner, the Small Business Majority’s vice president for policy and strategy, told Health Affairs magazine that small business owners need an exchange “that will fulfill many of the functions served by the human resources departments of larger businesses.”
The Affordable Care Act gave all 50 states and Washington, D.C., the option of creating a state health insurance exchange. The SHOP exchanges will be within the state exchanges, which also will help individuals without health insurance. The theory was that state health insurance experts would be more attuned to the needs of small businesses in their states than federal health insurance experts.
However, many state officials oppose state exchanges because they oppose “Obamacare.” Small businesses, and individuals, in these states can join a partnership exchange or participate in the federal exchange.
According to the Kaiser Family Foundation, Washington, D.C., and 18 states have declared they will participate in a state-based exchange -- California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington.
Seven states -- Arkansas, Delaware, Illinois, Iowa, Michigan, North Carolina and West Virginia -- have signaled interest in a partnership exchange that allows the federal government and a state to “work together to operate different functions of the exchange,” according to the U.S. Department of Health & Human Services. The other 25 states will “default” to the federal exchange, unless they re-examine their current opposition to the state or partnership exchanges.
These decisions can change. USA Today reported on Jan. 23, 2013, for example, that Mississippi’s governor is trying to block the decision by Mississippi’s insurance commissioner to accept a state-based exchange.
You can get more information on small business exchanges at http://www.healthcare.gov/news/factsheets/2011/07/exchanges07112011c.html.
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