So just how much will the health care bill that President Obama signed on March 2010 affect small businesses? The answer is: quite a lot.


But those affects may not be as economically stimulating as its proponents would have hoped in that it may actually discourage hiring activies among the smallest of businesses in the US- ie those with fewer then 50 employees. This is of significance because these companies make up a whopping 96% of all businesses within the U.S.

Here’s a rundown of the legislation:

On one hand…

  • Beginging in 2014, states will have to set up Small Business Health Options Programs(SHOP). These health insurance pools will be established in an effort to alleviate insurance costs, by allowing small businesses to group together to buy health insurance and to get competitive pricing for insurance premiums


  • Begining in 2014, businesses with more than 50 employees will be required to either offer healthcare coverage or pay a penalty of $750 a year per full-time employee. This coverage will be required to meet minimum federal standards or else employers will face an additional penalty of $2,000 per employee.
  • Companies with fewer than 50 employees are exempt from the required health care coverage mandate.
  • Businesses that pay more than 50% of employees’ health benefits, have fewer than 26 employees, and pay average annual wages of less than $50,000 can claim a tax credit of up to 35% of the cost of premiums from the 2010 tax year through the 2013 tax year. The credit will go up to 50% in 2014 and can be used for two consecutive years after that.
  • Companies with more than 50 employees will not get any tax credits.

That many small companies will find ways to stay under 50 employees because of the insurance mandate, is a plausible scenerio. They might, for example, break up their operations into separate companies, or hire more part-timers. For these reasons the new federal healthcare law may discourage some small businesses from bringing in additional employees, and thus may end up inadvertantly impeding an economic recovery.

Sources: /3:22MDs go online to cut costs

(Image Credit)

Leave a comment

Your email address will not be published. Required fields are marked *