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Health Care Reform: Giving small business a leg up

By Jim Wilmarth

After a long and often contentious debate, health care reform legislation was passed into law March 23. The passage of this legislation heralds a new era for small business. For years, small companies have paid 18% more than larger companies for the same employee health care coverage, according to the Small Business Administration. This legislation will help level the playing field, and it is hoped, give a boost to the overall economy. Small businesses will now be able to offer affordable health care insurance to their employees because of the following benefits.

Small business tax credits. This credit is available immediately for small nonprofit and for-profit businesses. It can cover up to 35% of premiums that small businesses pay for employees' health insurance. By 2014, the rate increases to 50% for two years, which the Congressional Budget Office (CBO) says could save small businesses $40 billion over the next decade.

Health insurance exchanges. To alleviate high administrative costs and give small businesses more bargaining power, health insurance exchanges can offer more choices and lower prices to companies with 100 or fewer employees. Starting in 2014, these businesses can purchase insurance through an exchange. According to the CBO, exchanges offer small businesses the leverage to negotiate lower premiums for employee health care, a luxury formerly available only to large firms.

An end to price discrimination beginning in 2014. Health care reform eliminates the practice of charging penalties for individuals with pre-existing conditions. In addition, insurance companies will no longer be able to charge higher premiums to small companies if an employee becomes sick or is faced with an ongoing health condition.

Health care security helps promote entrepreneurship. Assuring affordable coverage for all Americans empowers smaller firms to compete for the best workers. More individuals may also feel free to start businesses knowing the benefits they could offer would rival those of larger companies, thus attracting more talented workers.

Reduced hidden tax on small business health insurance. With insurance coverage for 32 million uninsured Americans by 2019, the hidden cost of treating uninsured individuals will be reduced. Nearly $1,000 for hidden costs will be eliminated from each health care premium, according to a White House fact sheet at www.whitehouse.gov.*

Lower premiums for small businesses. The sum total of the measures outlined here will give small business owners an affordable means to offer health care benefits to employees. According to CBO, health reform will reduce the cost of a given plan in the small group market by 1% to 4% by 2016.

For more information about how health care reform helps small business, visit www.healthreform.gov or www.whitehouse.gov/healthreform/small-business.

Jim Wilmarth is a Commercial Loan Officer at Bank of Amador with over 21 years of banking experience. For more information, contact Jim at (209) 223-7237 or jwilmarth@bankofamador.com.