Very Small Businesses May Benefit the Most from Healthcare Reform

The passage of the healthcare reform bill in March may have been welcomed news for many small business owners struggling to provide coverage for their employees. But small business owners should be aware that many of the health initiative’s main provisions will mostly benefit businesses with 50 or fewer employees and many of these provisions will also not go into effect for several years. (For an easy-to-read guide on the healthcare bill, check out this series at the Christian Science Monitor.)



Here’s what the new legislation means for the smallest businesses:

First, small business owners will be receiving tax credits for their insurance costs. The tax credit is generous, covering up to 35% of the cost of insurance premiums. This benefit applies to employers with fewer than 26 employees who pay average annual wages of less than 50,000. Employers also have to pay more than half of their workers’ health benefit costs if they want to receive this benefit.

Next, starting in 2014, small business will be allowed to participate in state-run Health Insurance Exchanges. These exchanges will allow businesses to join together as a purchase group. Larger groups will have increased bargaining power when negotiating prices with insurance companies, which will in turn reduce healthcare costs. Beyond that, exchanges could receive federal subsidies to help purchase health coverage.

Small business owners with fewer than 50 employees can also decide not to offer health insurance to their workers. They will be exempt from the federal healthcare mandate set to begin in 2014, under which all employers will have to either provide health benefits for their workers, or pay a $2000 fine per employee.

In short, the healthcare reform may bring many positive developments to the owners of the smallest businesses. But they’ll be waiting a few years for it to all to come together.


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