ICA Shaw Explains the Effects of Healthcare Reform on Small Businesses - Part VII of the Summer Healthcare Series

Department of Financial Services, Consumer eViews Volume 7 Number 30

July 23, 2010

Sean Shaw, Insurance Consumer Advocate

Navigating the Patient Protection and Affordable Care Act (PPACA) is difficult for individual consumers and can be just as difficult for small business owners. In the previous installments of this series the Office of the Insurance Consumer Advocate provided the public with information about various benefits and tools that will become available to consumers. In this edition, the Office of the Insurance Consumer Advocate would like to focus on small businesses and the benefits those small business owners and employees can expect in the coming years.

Under the PPACA, nearly 4 million small businesses could qualify for a small business tax credit this year. That equates to $40 billion in relief for small businesses over the next 10 years. The following are some of the requirements small businesses must meet to receive the tax credit.

• Small businesses with fewer than 25 full-time employees with an average annual wage of less than $50,000 that purchase health insurance for employees are eligible for the tax credit. The maximum credit of 35 percent will be available to employers with 10 or fewer full-time equivalent employees and average annual wages of less than $25,000. To be eligible for the tax credit, the employer must contribute at least 50 percent of the total premium cost.
• For 2010 through 2013, eligible employers may receive a small business tax credit of up to 35 percent of their contribution toward the employee’s health insurance premium. Tax-exempt small businesses meeting the requirements listed above are eligible for tax credits of up to 25 percent of their contribution.
• Businesses that receive state healthcare tax credits may also qualify for the federal tax credit. Dental and vision care plans may qualify for the credit as well.

In addition to the tax credit, small businesses will benefit from administrative simplification. This simplification ensures that all small businesses, health plans, physicians, hospitals, and patients are using the same terminology. This simplification is expected to save businesses many employee hours, which are currently lost to an inefficient system. The PPACA requires that the standard operating rules for eligibility and claims status be adopted and fully implemented by July 1, 2011. These benefits include:

• Improved coordination of care for the patient
• Increased payment accuracy and timeliness
• Reduced administrative cost and hassle factor for small businesses
• Payment transparency

Beginning in 2014, small businesses with up to 100 employees will have access to the state-based Small Business Health Options Program (SHOP) Exchanges, which will increase the purchasing power of small businesses. The Congressional Budget Office estimated that the Exchanges will reduce costs and increase competitive pressure on insurers and drive down premiums by up to 4 percent for small businesses. The following are some of the accompanying changes that small businesses can expect:

• Web portals that provide standardized, easy-to-understand information that make comparing and purchasing healthcare coverage easier for employees of small businesses.
• Tax credits for employees small businesses and their families to purchase coverage in the SHOP Exchanges, if they work for a business that doesn’t offer coverage.

For more information regarding the impact of the PPACA on small businesses, consumers should visit http://www.sba.gov/healthcarereform/index.html.

As more information is available and additional changes become effective, the Office of the Insurance Consumer Advocate will generate advisories regarding their effect on consumers and small businesses. More information regarding the PPACA can be found on the Florida Insurance Consumer Advocate’s website at http://www.myfloridacfo.com/ica/federalhealthcare.asp.