How the Healthcare Reform Proposals Will Really Impact Small Businesses

In the battle over healthcare reform, it seems like small businesses are caught in the middle – again.

Earlier in the year, Congress proposed a set of reforms that would heavily fine small businesses if they didn’t provide healthcare for their employees, sparing only those companies with a few employees. After small business advocates cried foul on these proposals and stated that the burden on small business owners would just be too great, the measure was dropped.

However, in its place came a new set of proposed reforms. The Senate Finance Committee decided to introduce a new healthcare reform bill that essentially rewards those small businesses that provide healthcare to their employees.

The main proponent of this bill, Senator Max Baucus (D) of Montana, is interested in creating nonprofit insurance exchanges, which will be offered to small businesses with less than 100 employees.

This current piece of healthcare reform has many aspects, much of which will greatly affect small business owners regarding how they pay for their employees’ healthcare:

  • Tax credits will be rewarded to small businesses that provide health insurance to their employees, although only those employers with 25 or fewer employees will qualify for these tax credits. It is important to note, however, that more than 92 percent of small businesses have less than 25 employees. In addition, this new bill will only apply to small businesses whose average employee makes less than $40,000 per year.

  • Small businesses with 50 or more employees will likely be fined if they don’t offer health insurance to their employees. It is also important to note than just four percent of small businesses have more than 50 employees. Employers with more than 50 employees will have to pay fines for each employee under this bill if they don’t provide health insurance, thereby imposing hefty fines on these employers.

  • More taxes will be imposed on insurance policies with premiums above $8,000 for an individual and more than $21,000 for a family. These new taxes could be ultimately passed onto employers’ health insurance plans, thereby resulting in higher premiums. For many employers, these taxes could result in simply too much financial burden.

While the bill has yet to be finalized, the relationship between small businesses and healthcare will certainly change in the upcoming legislative sessions.