The new health insurance reform recently signed into law has both pros and cons for small businesses. Sorting out the pros from the cons is not a simple task. Although it isn’t immediately clear how some of the provisions will be implemented, there are many things about the Act’s implications for small businesses that are known.
The most important factor in determining the effect of the Act on your small business is the size of your business. Small businesses with 10 or fewer employees who have annual wages of less than $25,000 will be eligible for the full tax credit. Tax breaks are also available for any business that has fewer than 25 employees and that pays average annual wages of less than $50,000.
From tax year 2010 through tax year 2013, businesses will get a 35% tax credit for the amount they contribute toward their employee’s health insurance premiums. It is important to know, however, that the employer must currently be covering at least 50% of the total premium cost for its employees in order to qualify. If, however, the premiums in the business’s area are extremely high, the business may still qualify for the tax credit if it is covering at least 50% of a “benchmark” premium set by the Department of Health and Human Services.
Under the new law, however, it is not mandatory for smaller businesses to offer health insurance, even after 2014. For businesses with more than 50 employees, on the other hand, offering health care coverage will become mandatory in 2014.
A huge concern for small businesses, especially those with more than 25 employees, are the always increasing costs of health insurance. In fact, according to the questions and answers for small business owners provided by the White House, small business owners currently pay up to 18% more than larger companies for identical health insurance policies. Although the new law is intended to bring down these costs — through its creation of a health insurance exchange, offering of a tax credit, and attempt to minimize administrative costs — it is unlikely that health insurance costs will stop increasing. Still, the tax credits and other incentives provided under the act will allow smaller businesses to provide health insurance to their employees.
Crumpton Law LLC is a Columbus Small Business Law Firm, with attorney Matthew Crumpton serving as managing member and lead counsel.