How do the revised rules in the Bipartisan Budget Act of 2015 affect you and your business?
The small-business health-care tax credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees. It’s specifically targeted for those businesses with low- and moderate-income workers. Four million small businesses nationwide are eligible for these tax credits, which are meant to encourage small employers to offer health insurance coverage for the first time or maintain the coverage they already have.
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A business that employs up to 25 people, pays average annual wages below $50,000, and provides health insurance may qualify for the tax credit of up to 35 percent (up to 25 percent for nonprofits) to offset the cost of insurance. The credit goes up to 50 percent for small business employers (35 percent for non-profits) beginning in 2014.
Beginning in 2014, individuals, families and businesses with fewer than 100 employees can take a new premium tax credit to help them afford health insurance coverage purchased through what will be known as an exchange. Exchanges are meant to lower health-care costs by increasing competition among private insurance plans and giving small businesses the same purchasing power as large corporations; make it easier for consumers to purchase a plan by having comparable options in one place; and offer coverage to more Americans who may not already have it. Colorado’s exchange was the first in the country to be created with bipartisan support and the process to get it up and running is already fully underway. Small businesses create 70 percent of new jobs, so lower insurance costs means the small businesses can focus on helping their local economies expand.
Another insurance protection for small employers is the Medical Loss Ratio which requires insurance companies to spend at least 80 percent of small employer premium dollars on medical costs. Small businesses pay 18 percent more than large companies so MLR will help create a level playing field.
Additionally, the Affordable Care Act requires health insurers that want to increase their rates by 10 percent or more to submit their request to, in Colorado’s case, the Division of Insurance, in order to determine whether the rates are reasonable. Insurance companies also have to publicly justify unreasonable premium rate increases. These provisions have brought greater transparency, accountability, and, in many cases, lower costs for families and small business owners who struggle to afford coverage. The Affordable Care Act has provided a $4 million grant to Colorado to help Colorado’s efforts to enhance the rate review process as well as the consumer education efforts.
Business owners and their covered employees will also benefit from provisions in the Affordable Care Act that prevent insurance companies from taking coverage away from children with pre-existing conditions, offer policy holders preventive benefits like flu shots, cancer screenings, wellness exams often with no cost-sharing, and put an end to lifetime limits on policies.
MIT economist Jonathan Gruber conducted research that demonstrated that without health-care reform, small businesses would pay nearly $2.4 trillion in health-care costs over the next 10 years. His analysis also found that $52.1 billion in small business profits, $834 million in wages and 178,000 small business jobs would be lost by 2018 as a direct result of high health-care costs. The Affordable Care Act is already helping businesses in Colorado and will continue to do so as the law continues to be implemented and more and more individuals and businesses see the benefits of the recent changes firsthand.
Chafee is with Know Your Care Colorado, a nonprofit focused on educating the public about the Affordable Care Act.