Health Care Reform Helps Small Businesses Offer Coverage:
THURSDAY, Sept. 2 (HealthDay News) -- As the provisions of the
Affordable Care Act begin to be implemented, many small businesses
in the United States will be able to take advantage of new tax
credits, a new report shows.
During the first phase of the act, some businesses employing
some 16.6 million workers will be eligible for these tax credits,
according to the report released Thursday from the Commonwealth
"The new law is likely to have a significant impact on affordability and access to health care coverage for small business owners and employees," Commonwealth Fund president Karen Davis said during a press conference Wednesday.
Research has shown that small companies pay more than large
companies for the same health care coverage, Davis said. "Small
firms face higher premiums due to higher costs in the small
business market related to administration, marketing, brokers' fees
and other overhead," she explained.
Many small businesses find health insurance is not affordable so
they do not offer coverage, Davis noted. But, provisions of the
Affordable Care Act target small businesses, she said.
The tax credits designed to offset health insurance premiums and
help small businesses afford health insurance will start this year,
By 2013, as many as 3.4 million workers may work in companies
that take advantage of the tax credit. These credits increase in
2014, from 35 percent of the employer's premium contribution to up
to 50 percent, she noted.
According to the report, small businesses need help in being
able to provide their workers with health insurance. Almost all (98
percent) of large companies cover their employees, compared with 46
percent of businesses with fewer than 10 employees.
Also, in companies with fewer than 50 employees, 52 percent of
the workers are uninsured or under-insured.
Based on the provisions of the Affordable Care Act, the
Congressional Budget Office estimates these tax credits could
provide as much as $40 billion in support to small businesses over
the next 10 years, reducing health insurance premiums by 8 percent
to 11 percent by 2016, the report says.
More savings will be seen by 2020 through provisions that reduce
administrative spending and increase competition among insurers
participating in state and federal insurance exchanges, Davis
To qualify for the tax credits, eligible employers must pay at
least 50 percent of their employees' health insurance premiums,
according to the report. The credits are determined by the size and
average wage paid by the company.
The tax credits will increase to 50 percent of the premium
contributions in 2014, but they are limited to two years.
Tax-exempt groups are also eligible for the tax credits, but at a
lower rate, according to the report.
In addition to the tax credits, several other of the act's
provisions going into effect this year will benefit small
businesses and their employees:
- Limits on administrative costs. Starting this year, health
plans will have to report the amount of premiums not spent on
health care. In 2011, plans insuring small businesses and
individuals will have to limit spending on administrative costs to
not more than 20 percent of premiums. Plans that spend more will
have to give rebates to enrollees.
- The act also requires state and federal governments to review
any increase in premiums, which could also keep costs low.
- In 2014, small businesses will be able to insure their
employees through state health insurance exchanges, which pool
members in programs to lower costs. All plans will limit
out-of-pocket costs to $5,950 for a single person and $11,900 for a
family. Deductibles for small businesses can be no larger than
$2,000 for a single person or $4,000 for a family.
- All plans sold in exchanges will have to provide a standard,
comprehensive benefit package.
- In 2014, plans cannot deny coverage or refuse insurance to
those with existing medical conditions.
- Those working for small businesses who aren't offered insurance
by their employers can buy health insurance through the insurance
- People with families of four with incomes up to $88,000 will be
eligible for subsidies to help them pay their premiums.
In addition, Medicaid is being expanded to include everyone
earning up to 133 percent of the federal poverty level, which is
$29,327 a year for a family of four, according to the report.
William Donelan, vice president for medical affairs at the
University of Miami Miller School of Medicine, said that "this may
be among the most important components of the overall bill."
"It really does target a population of Americans who work in small businesses and make relatively modest wages," he said. "This is a group of people who have rapidly joined the ranks of the uninsured, because their employer can't afford it and they can't afford it in the individual insurance marketplace."
Also released Thursday: A report from the Kaiser Family
Foundation and the Health Research & Educational Trust says
that employees are now paying almost $4,000 toward the cost of
health insurance, which is an increase of 14 percent, or $482,
above what they paid last year.
According to the report, the increase occurred even though the
total premiums rose only 3 percent, to $13,770 this year.
Since 2005, employees' contributions to premiums have risen 47
percent, while overall premiums rose 27 percent, wages increased 18
percent, and inflation rose 12 percent, the researchers pointed
Many employers are also raising deductibles. Twenty-seven
percent of workers now have annual deductibles of $1,000, up from
22 percent in 2009. Among small firms, 46 percent have such
deductibles, the survey found.
"High out-of-pocket expenses and premiums affect health-care decisions for patients. If premiums and costs continue to be shifted to consumers, households will face difficult choices, like foregoing needed care, or reexamining how they can best care for their families," Maulik Joshi, president of the Health Research & Educational Trust and senior vice president for research at the American Hospital Association, said in a statement.
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