Understanding health care reform

Monday, September 19, 2011
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Although the health care reform law passed last year includes an individual mandate that people purchase insurance, there is no mandate that small businesses provide health insurance coverage to their employees.

Small business owners have many misconceptions about the Patient Protection and Affordable Care Act, says policy analyst Thomas McAuliffe with the non-partisan, not-for-profit Missouri Foundation for Health.

His organization has been traveling the state, meeting with groups and hosting town hall meetings to answer questions about the 2,700-page law.

"If you are a small business with less than 50 employees you will not be affected in a negative way. You don't have to offer insurance to your employees," McAuliffe said.

Small businesses with fewer than 50 employees also are not subject to any fines related to health coverage. Small businesses with less than 25 employees are eligible for tax credits to help cover the cost of health insurance if they choose to offer coverage.

"These tax credits are an awesome opportunity for small businesses. It started last year and continues through 2014," McAuliffe said.

These subsidies are worth 35 percent of the employers' portion of the health insurance cost. Businesses must fill our IRS Form 8941 to claim this tax credit. In 2014, this subsidy will increase from 35 percent to 50 percent of the employer's share of premiums.

Another component of the Affordable Care Act that could potentially be positive for small businesses is the health insurance exchange program.

The federal health care reform law calls for states to establish health insurance exchanges in which small businesses and people who aren't offered insurance by their employer may purchase coverage. Setting up the exchanges is left up to the states but must be done by Jan. 1, 2014. In this year's legislative session, House Bill 609, sponsored by Rep. Chris Molendorp, R-Belton, would have set up an insurance exchange for Missouri. The bill passed the House unanimously but did not come up for a vote in the Senate after some senators threatened to filibuster it.

If Missouri doesn't establish its own health insurance exchange, the federal government will step in and do it. Seven states -- California, Colorado, Connecticut, Maryland, Vermont, Washington and West Virginia -- have already set up these exchanges, according to the National Conference of State Legislatures.

Typically, small businesses pay higher administrative costs for health insurance than large companies do, McAuliffe said.

"When small businesses purchase their insurance they can pay up to 40 percent on administration, compared to the 3 to 4 percent a large business may pay," he said. "These exchanges actually level the playing field. Everyone in the exchanges will pay the same administrative cost."

For small businesses with fewer than 100 employees and that currently offer health care coverage, they will have the option of sending employees to the state's health insurance exchange instead or keeping their existing plans in place.

"The fact is, if you currently have health insurance and currently have a provider or broker for your business you like, nothing changes," he said. "If you don't offer insurance, or you want to get a more affordable price, then this law creates more opportunity not only with these exchanges, but we know from Massachusetts the insurance market gets more competitive once the exchanges get up and running."

Massachusetts adopted a state government regulated health insurance program in 2006.

It's also possible many small business employees, based on their income, may qualify for federal subsidies to purchase insurance through the new exchanges, McAuliffe said.

The Affordable Care Act is expected to give 400,000 previously uninsured Missourians access to health care coverage, which will also benefit Missouri's small businesses, he said.

"Healthier employees show up to work more often, have fewer days when they come in sick," McAuliffe said.

Businesses with more than 50 employees face different regulations under the federal health care reform law.

If these businesses don't offer health insurance by 2014 they may be subject to stiff penalties ranging from $2,000 to $3,000 per employee if their workers receive government subsidized coverage in a health insurance exchange.

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