Millions of small business workers will be able to afford health coverage, or pay lower premiums, because of tax credits that kick in this year through the Affordable Care Act, according to a report from the Commonwealth Fund.
The report, Realizing the Potential of Health Reform: Small Businesses and the Affordable Care Act of 2010, says that by 2013, 3.4 million workers will benefit from the tax credits their employers will use. These small business employers are the first to receive direct subsidies under the ACA.
The tax credits increase in value in 2014, from up to 35% of the employer's premium contributions, to up to 50%.
The report says that relief for smaller businesses "is greatly needed, as most of the erosion in employer health coverage over the last decade has taken place in small firms. Nearly all firms (98%) with 200 or more employees offer health benefits compared to only 46% of firms with fewer than 10 employees."
Lead author of the report, Commonwealth Fund Vice President Sara Collins, said that "When it comes to purchasing health insurance, small businesses have long been at a disadvantage compared to larger firms. Because of high costs, many of them stopped offering heath insurance or asked employees to pay larger percentages of premiums.
"This new, regulated health insurance marketplace evens the playing field and gives small businesses comprehensive, affordable optinons for covering their workers."
About half of workers in firms with fewer than 50 employees are uninsured or underinsured.
An estimated $40 billion worth of support over the next 10 years will reduce small companies' health insurance premiums, by 8 to 10% by the year 2016.
Many small businesses that will be eligible will be healthcare providers.
To qualify, employers must pay at least 50% of their employees' health insurance premiums. The credits are determined by the business size and average wage, with smaller companies benefiting the greatest credit of 35% this year.
Small businesses benefit in three other significant ways this year, the Commonwealth Report explains.
1. Since small companies have the highest share of health insurance premiums going to administrative costs, they will benefit the most from a new rule that requires health plans to limit spending on administrative costs to not more than 20% of premiums.
2. Small business premiums might also be reduced because the Secretary of Health and Human Services and individual states will establish processes to review insurers premium increases, and those insurers will be required to publicly justify unreasonable rate increases publicly.
3. Employees of small companies that don't offer coverage, and who can't buy their own health policies because of preexisting conditions, will be eligible for special new Preexisting Condition Plans (PCIPS). Employees must be uninsured for at least six months and be able to show that their health problem makes it difficult to obtain health insurance. These plans will operate until 2014 when they are replaced by state insurance exchanges.
In 2014, the following provisions will benefit small businesses and their employees.
1. Five million workers will gain health insurance or have coverage stabilized and improved through their employers when state health insurance exchanges take effect in 2014. Businesses with fewer than 50, or depending on the state, fewer than 100 employees can purchase employee plans through these exchanges.
2. While insurers currently can deny coverage or charge high premiums based on health status, by 2014, they will not be able to do so. Also in 2014, insurers participating in exchanges or selling insurance in the individual and small group markets will only be able to use certain factors to determine premiums, such as geographic region, age and tobacco use. Health status will no longer factor into premiums and coverage decisions.
3. Employees of small businesses that don't offer insurance will be able to buy policies through the exchanges. Those with annual incomes up to $88,000 for a family of four will be eligible for subsidies to help with premiums. And, Medicaid will be expanded to include everyone earning up to 133% of poverty level, currently $29,327 a year for a family of four.