Posted by: Tamela Adamson-McMullen
After months, years and even decades of political haggling, healthcare reform is a reality. Here’s a quick rundown of the new legislation and what small businesses can expect from it:
• The law provides healthcare to 32 million people who are currently uninsured, expands the reach of Medicaid, protects people with preexisting conditions from being denied coverage and allows children to remain on their parents’ insurance plans until they are 26 years of age.
• It also creates “insurance exchanges,” a type of insurance marketplace in which small businesses and individuals can band together and choose health insurance options at the best rates. States must have the exchanges in place by 2014.
• The whopping price tag—estimated at $938 billion—will be paid by dipping into Medicare savings and by imposing new taxes on higher-income brackets and portions of the insurance and pharmaceutical industries.
• There is no employer mandate to insure workers. However, mid- to large-size companies (with 50 or more full-time employees) that don’t provide insurance coverage to their workers will pay a per-worker fee. This has been referred to as a “play or pay” provision in the law.
• Small businesses will be protected from sudden, arbitrary rate hikes if a worker becomes sick because insurance companies will no longer be permitted to base the cost of coverage on health status.
• Small businesses will receive a tax credit to cover up to 35 percent of the insurance premiums they pay for their workers. In 2014, the rate will increase to 50 percent. (The Congressional Budget Office estimates that the tax credit will save small businesses $40 billion by 2019.) The tax credit is already in place and was effective Jan. 1 of this year.
• To qualify for the tax credit, firms must have fewer than the equivalent of 25 full-time workers, pay average wages below $50,000 and cover at least 50 percent of their workers’ healthcare costs. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for those that have between 10 and 25 full-time workers.