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Health Care Reform: Small Business Winners and Losers
Whenever new legislation becomes law, there are winners and losers in the small business world. Health care reform is no exception to this rule, but it may be difficult at this point to determine if you'll be a small business winner or loser.
Posted 5/ 10 10 at 1:22 PM | News
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Whenever new legislation becomes law, there are winners and losers in the small business world. Health care reform is no exception to this rule, but it may be difficult at this point to determine if you'll be a small business winner or loser."No one knows the answer yet, because it's too early to comparison shop," says Bill Bartmann, CEO of Bartmann Enterprises (http://www.billbartmann.com/), who works with 4,000 small businesses. He adds "fear and paranoia" can be found throughout the small business community, because entrepreneurs don't yet understand the full impact of the bill on their businesses.
Bartmann thinks this could be bad for the economy, and small businesses need to know the answer quickly, because this lack of knowledge "causes businesses to freeze up. They are afraid to hire new employees and invest in new inventory."
So based on what we know now, who are the winners and losers?
WINNERS: Small businesses that want to offer health care coverage now but can't afford to do so may be eligible for an immediate tax credit to make it more affordable.
If you employ 25 or fewer employees and pay average annual wages of less than $50,000, you will be eligible for a tax credit of up to 35% of the employer's contribution toward health care between 2010 and 2013, as long you pay at least 50% of the premium. Also, small businesses with 10 or fewer employees who have annual wages of less than $25,000 will be eligible for a full credit. The tax credit phases out as firm size and average wage increases.
David Borris, a member of the national committee of Main Street Alliance, a network of state-based small business coalitions (http://mainstreetalliance.org), told The Wall Street Journal (http://online.wsj.com/article/SB10001424052748704100604575146284113597958.html), "That's important because small businesses, especially start-ups, have a difficult time competing for top talent." These tax credits will make it easier for them to offer health insurance and be able to provide a more comprehensive benefits package so they can compete.
LOSERS: Small businesses in the tanning business will need to impose a tax of 10% for indoor tanning services starting immediately. This 10% increase in cost could result in fewer customers.
WINNERS: Small businesses that would like to establish a wellness program.
If you've been thinking of establishing a wellness program for your employees, grant money will be available for small business employers beginning in fiscal year 2011.
LOSERS: Small businesses with more than 50 employers that do not currently offer insurance and don't want to offer any type of health care coverage.
If you have more than 50 employees, you will need to offer health or pay a tax penalty beginning in 2014. Any employer with more than 50 employees that has at least one full-time employee who receives a premium tax credit will have to pay a fee of $2,000 per full-time employee. The first 30 employees will be excluded from that assessment.
Borris said that 96% of businesses in the U.S. have less than 50 employees. Of those small businesses with more than 50 employees, over 95% already offer health care coverage. So about 4% of small businesses fit into this particular category.
WINNERS: Small businesses with 50 or fewer employees that are exempt from any tax penalties, but will be eligible to buy insurance on the Small Business Health Options Program (SHOP) exchange.
For the first two years beginning in 2014, they will be eligible for a tax credit of up to 25% of the employer's contribution toward the employee's health insurance, provided they are paying at least 50% of the premium. Right now this credit is only available for two years, but Congress could choose to extend the credit.
When health care reform is fully in place, SHOP exchanges run by the states will become a competitive marketplace for small businesses to buy insurance. Small businesses with up to 100 employees will be able to use these exchanges, and states do have the option to permit larger employers to buy coverage using these exchanges as well. Beginning in 2011, states will begin to get funding to establish these exchanges, and the funds will be available through 2015.
While no one can say what insurance will cost for small businesses, the tax credits that will be available will make it more affordable for small business to decide to offer health care coverage. But, as long as your business employs 50 or fewer employees, you're exempt from any penalties.
You can find out more details about the health care legislation at The Henry J. Kaiser Foundation's Web site (http://www.kff.org/heathreform/sidebyside.cfm).
So based on what we know now, who are the winners and losers?
WINNERS: Small businesses that want to offer health care coverage now but can't afford to do so may be eligible for an immediate tax credit to make it more affordable.
If you employ 25 or fewer employees and pay average annual wages of less than $50,000, you will be eligible for a tax credit of up to 35% of the employer's contribution toward health care between 2010 and 2013, as long you pay at least 50% of the premium. Also, small businesses with 10 or fewer employees who have annual wages of less than $25,000 will be eligible for a full credit. The tax credit phases out as firm size and average wage increases.
David Borris, a member of the national committee of Main Street Alliance, a network of state-based small business coalitions (http://mainstreetalliance.org), told The Wall Street Journal (http://online.wsj.com/article/SB10001424052748704100604575146284113597958.html), "That's important because small businesses, especially start-ups, have a difficult time competing for top talent." These tax credits will make it easier for them to offer health insurance and be able to provide a more comprehensive benefits package so they can compete.
LOSERS: Small businesses in the tanning business will need to impose a tax of 10% for indoor tanning services starting immediately. This 10% increase in cost could result in fewer customers.
WINNERS: Small businesses that would like to establish a wellness program.
If you've been thinking of establishing a wellness program for your employees, grant money will be available for small business employers beginning in fiscal year 2011.
LOSERS: Small businesses with more than 50 employers that do not currently offer insurance and don't want to offer any type of health care coverage.
If you have more than 50 employees, you will need to offer health or pay a tax penalty beginning in 2014. Any employer with more than 50 employees that has at least one full-time employee who receives a premium tax credit will have to pay a fee of $2,000 per full-time employee. The first 30 employees will be excluded from that assessment.
Borris said that 96% of businesses in the U.S. have less than 50 employees. Of those small businesses with more than 50 employees, over 95% already offer health care coverage. So about 4% of small businesses fit into this particular category.
WINNERS: Small businesses with 50 or fewer employees that are exempt from any tax penalties, but will be eligible to buy insurance on the Small Business Health Options Program (SHOP) exchange.
For the first two years beginning in 2014, they will be eligible for a tax credit of up to 25% of the employer's contribution toward the employee's health insurance, provided they are paying at least 50% of the premium. Right now this credit is only available for two years, but Congress could choose to extend the credit.
When health care reform is fully in place, SHOP exchanges run by the states will become a competitive marketplace for small businesses to buy insurance. Small businesses with up to 100 employees will be able to use these exchanges, and states do have the option to permit larger employers to buy coverage using these exchanges as well. Beginning in 2011, states will begin to get funding to establish these exchanges, and the funds will be available through 2015.
While no one can say what insurance will cost for small businesses, the tax credits that will be available will make it more affordable for small business to decide to offer health care coverage. But, as long as your business employs 50 or fewer employees, you're exempt from any penalties.
You can find out more details about the health care legislation at The Henry J. Kaiser Foundation's Web site (http://www.kff.org/heathreform/sidebyside.cfm).
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