Thought you would find this short article on how health reform could affect small business interesting. This is from Independent Agent Magazine, Insurance News and Views.
On the Hill
Health Care Reform Hits Small Businesses with New Rules
Regardless of size, agencies may face new requirements and some potential new grant and tax credit opportunities.Last week’s IN&V included “What Does the New Health Care Reform Law Mean for Agents?”, a piece examining the health care reform from a health insurance sales standpoint. This week, IN&V looks at the new law from a small business perspective. Whether you have a small, medium or large agency, you may be facing many new requirements and some potential new grant and tax credit opportunities. Much like the health insurance delivery aspect, many of the specifics affecting small businesses will be somewhat of a question mark as the law’s implementation occurs over the next four years.
For example, starting in 2011, small businesses will be eligible to receive federal grant money to set up “wellness initiatives” that some Big “I” members may be interested in pursuing. Aside from stating that such grants will be available, the law does not specify who would be eligible, how small businesses would apply, or what exact “wellness initiatives” they would need to undertake. All of these issues would be left to future rulemaking by the Department of Health and Human Services (HHS) and the states. However, despite the uncertainty over many of the specifics of the new law, the Big “I” can provide some generalities about what the bill may mean for small businesses.
Although the new law does not contain a true employer mandate, by 2014, employers with more than 50 employees will face a penalty if they do not offer health insurance coverage AND at least one of their employees gets coverage through an Exchange and gets a premium credit. The penalty will be a $2,000 per full-time employee penalty (the first 30 employees will be excluded from the calculation). In determining whether a business has 50 employees, part-time employees will have their aggregate hours combined, with 30 hours a week counting as a full-time employee. For example, if an agency has two part-time employees working an average of 15 hours per week, that will count as one full-time employee. Meanwhile, employers that do offer health insurance coverage but have at least one employee who receives a premium credit through an Exchange are required to pay the lesser of $3,000 for each employee who receives a premium credit or $750 for each full‐time employee.
Some small businesses may be eligible for temporary tax credits to help them adjust to the new law. In 2010, small businesses with less than 25 employees and average annual wages of less than $50,000 are eligible for tax credits of up to 35% of the employer’s contribution toward the employee health insurance premium. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The amount of the credit will decrease as the business size and average wages increase, to a maximum of 25 employees and average wages of $50,000. Employers must subsidize at least 50% of their employees’ premiums in order to be eligible for the tax credit. In 2014, this tax credit will change, and the eligible small businesses will have tax credits up to 50% of the employer’s contribution; again the amount of the credit would phase down as the size and wages of the business increase. After 2014, these credits would only be available for two years to any particular small business.
All employers, regardless of size, will have to abide by a litany of new administrative requirements. In 2011, all employers must include the aggregate cost of employer-sponsored health benefits on each W2 tax form. If an employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of all such health coverage but exclude all contributions to HSAs and Archer MSAs and salary reduction contributions to FSAs. Also in 2011, all employers will be required to enroll employees in a new national public long-term care/disability program called the “CLASS Act” unless the employee opts out. By 2013, employers will have to provide written notice to employees on the existence of state-based exchanges. Starting in 2014, employers that have a waiting period before health insurance coverage becomes effective cannot have that waiting period exceed 90 days.
These are just a few of the many changes on the horizon for small businesses as the health care reform law is implemented. Big “I” members will undoubtedly continue to have many questions about how the new law will impact them, as health insurance professionals and small businesses; and the Big “I” and each state association will continue to work to ensure that agents and brokers have the tools necessary to both survive and thrive in this new health care world.
John Prible (john.prible@iiaba.net) is Big “I” vice president of federal government affairs.