Health Care Reform – What Does the Health Care Bill Mean For Small Business?

Beginning in 2010
Eligible small business employers will receive a 35% tax credit on the contribution to their employees health insurance premiums from 2010 to 2013.

Eligibility Rules:
Providing health care coverage – A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.

Firm size – A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).

Average annual wage – A qualifying employer must pay average annual wages below $50,000.
Both taxable (for profit) and tax-exempt firms qualify.

Amount of Credit:
Maximum Amount – The credit is worth up to 35 percent of a small business’ premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).

Phase-out – The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

Last week the IRS mailed postcards to 4 million small businesses with information about this credit which is called the Small Business Health Care Tax Credit.

Under their tax qualified employer-provided health plans, parents can now cover their adult children up to 26 years of age.

Beginning in 2011
States will receive funding to establish web-based state insurance exchanges, which will be called Small Business Health Options Program (SHOP) in 2011. These exchanges will allow small businesses to form alliances and purchase insurance policies together at reduced rates.

Small businesses will be eligible to receive federal funding if they provide their employees with wellness programs from 2011 to 2015.

The definition of qualified medical expenses from Health Spending Accounts (HSA’s), Archer Medical Savings Accounts (MSA’s) and reimbursements through Health Flexible Spending Arrangements (HFSA’s) and Health Reimbursement Arrangements (HRA’s) has been modified to exclude over the counter medicines.

A $2,500 cap will be applied to flexible spending accounts.

In 2011, a simplified cafeteria plan will allow self employed individuals and employees to choose specific benefits that meet their needs.

A $250 rebate to Medicare beneficiaries who are affected by the donut hole.

A temporary high risk pool for individuals who are uninsured because of a pre-existing condition