Posted by Kristie Arslan - Today, President Obama will be signing into law the health reform legislation recently passed by the House of Representatives. While reforming our health care system has been a frequent topic in Congress, the debate heated up once Mr. Obama ascended to the Presidency with Democratic majorities in both the Senate and House.
Throughout the process, a large number of small business organizations expressed their dissatisfaction and/or outright opposition to the final health reform bill. In a recent survey conducted by the National Association for the Self-Employed, three in five micro-business owners indicated that they did not support the final reform proposal. Their chief concerns about the legislation were that it allowed too much government intervention in health care and it would be too costly for our nation.
At the end of the day, after a long and raucous debate, the Democrats have emerged victorious on health reform. The question now is what does this mean for the self-employed and small business community. Here are some of the positives and negatives of our newly reformed health care system:
PROS
- Tax Credits To Assist with Premium Costs: Small businesses with fewer than 25 employees and average annual wages of less than $50,000 that purchase group health coverage for their workers will be eligible for a tax credit of up to 35% for tax years 2010 through 2013. Small business owners must contribute at least 50% of the total premium cost for workers to qualify. The credit will be increased in subsequent years once the new health marketplaces, known as Exchanges, are created in 2014. For the self-employed, if you are an individual making below $43,320 or a family of four with income below $88,200 you will quality for health tax credit starting in 2014.
- Insurance Market Reforms: Immediately, insurance companies will no longer be able to deny coverage to children with preexisting conditions and children will also be permitted to remain on parents’ policies until age 26. Within six months, insurance companies are prohibited from putting lifetime limits on dollar value of coverage and rescinding coverage except in cases of fraud. In 2014, insurance companies will no longer be able to deny coverage to anyone due to their health status or a preexisting condition.
- Creation of Health Marketplaces known as Exchanges: States will be required to create insurance pooling mechanisms known as Exchanges to increase competition in the insurance market and improve the accessibility and affordability of coverage for individuals, the self-employed and small businesses.
CONS
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Assistance with Affordability for the Self-Employed: As mentioned above, the self-employed will get a tax credit if they fall within certain income requirements. However, while small businesses get immediate assistance, the self-employed must wait until 2014. With health care costs rising every year, the self-employed need immediate assistance with affording coverage. Additionally, the only way to access the tax credit is if a self-employed business owner drops the insurance they have and buys coverage in the newly created state-based Exchanges. This requirement makes it impossible for the self-employed to keep the coverage they have if they like AND get assistance with affordability.
- New Benefit Requirements Add to the Cost of Coverage: Under the new law, the Department of Health and Human Services will create a new essential health benefits package which would provide for a comprehensive set of services. All insurance must have benefits equal to or greater than the new essential benefits package. Since this is likely to be more generous than currently available in the individual insurance market where the majority of the self-employed and their workers purchase coverage, cost of coverage will increase. In fact, the Congressional Budget Office found that those in the individual market such as the self-employed would be paying anywhere from 10 percent to 13 percent higher in premium costs after reform.
- Mandates Requiring the Purchase of Coverage: All Americans, including the self-employed, will be required to have qualifying health coverage or pay a tax penalty. Exemptions will be granted for financial hardship, religious objections, and other qualifying factors. In small businesses with more than 50 employees that do not provide coverage to workers, the business owner will be required to pay a fee per employee. Those businesses with less than 50 employees are exempt from the employer mandate.
For more information on how the health reform bill may affect you and your business, here are a few informational resources:
CNN Money- What Health Reform Means for Your Business?
The Christian Science Monitor- Health Care Reform 101
USAToday- Small Business Owners Unclear On Health Care Impact