Health Care Reform’s Effect
on Small Businesses
SOUTH DAKOTA RETAILERS ASSOCIATION
Presented by:
Christopher E. Hoyme
Jackson Lewis, LLP
10050 Regency Circle, Suite 400
Omaha, NE 68114
(402) 391-1991
[email protected]
www.jacksonlewis.com
HEALTH CARE REFORM
•
Building on a year's work from the House and the
Senate, President Barack Obama signed the new the
health care reform bill into law on March 23, 2010.
•
The provisions set forth in the new health care
reform bill have been changed numerous times, and
the final version of the health care reform legislation
is still subject to interpretation and modification in
the months and years ahead.
•
This presentation will highlight the goals of the health
care reform, along with its immediate impact on
small businesses such as those comprising the
South Dakota Retailers Association.
HIGHLIGHTS OF THE NEW HEALTH CARE REFORM
According to the Obama Administration, the new health care reform
legislation will result in the following positive developments:
•
It makes insurance more affordable by providing the largest middle
class tax cut for health care in history, reducing premium costs for
tens of millions of families and small business owners who are
priced out of coverage today.
•
It sets up a new competitive health insurance market giving millions
of Americans the same choices of insurance that members of
Congress will have.
•
It brings greater accountability to health care by laying out common
sense rules of the road to keep premiums down and prevent
insurance industry abuses and denial of care.
•
It will end discrimination against Americans with pre-existing
conditions.
•
It puts our budget and economy on a more stable path by reducing
the deficit by more than $100 billion over the next ten years –
and more than $1 trillion over the second decade – by cutting
government overspending and reining in waste, fraud and abuse.
Does The Health Reform Require Me To Provide
Insurance?
NO
•
The new law will not require you to provide
insurance. However, it will provide tax credits if
you do decide to provide insurance to your
employees.
South Dakota
•
Small businesses make up 79 % of South
Dakota’s businesses, but only 35% of those
small businesses offered health coverage
benefits in 2008.
•
16,400 small businesses in South Dakota could
be helped by a small business tax credit
proposal that makes premiums more affordable.
Six Ways Health Reform Will Help Small Businesses
(1) Establishes A Health Care Tax Credit For Small
Businesses
•
Tax credit immediately covers up to 35% of
health care premiums for small businesses.
•
In 2014, the rate will increase up to 50%.
When Is The Tax Credit Available?
IMMEDIATELY!
•
Small businesses that currently provide health
care for their workers will get immediate help
with their premium costs.
•
In addition, any business that initiates coverage
this year will also get a tax cut.
Is Our Business Eligible For Tax Credit?
•
To qualify, businesses must have less than the
equivalent of 25 full-time workers (e.g., a firm
with fewer than 50 half-time workers would be
eligible).
•
Qualifying firms must pay their employees, on
average, less than $50,000.

•
For example: If you have 10 full-time workers,
your total wages must be less than $500,000.
Qualifying firms also must cover at least 50% of
the cost of the health care coverage for their
workers.
How Much Credit Can We Expect?
•
For-profit businesses can receive a credit of up
to 35% of their premium costs.

On January 1, 2014, this rate increases to
50%.
• Non-profit,
tax-exempt organizations are eligible
for a 25% tax credit now, and up to a 35% credit
beginning in 2014.
Example Of Hypothetical Savings
(1) Main Street Mechanic—Auto Repair Shop

10 Employees

Wages $250,000 or $25,000 per worker

Employer Health Care Costs: $70,000
 2010
Tax Credit: $24,500 (35% Credit)
 2014
Tax Credit: $40,000 (50% Credit)
Example Of Hypothetical Savings
(2) Downtown Diner--Restaurant

40 half-time employees (equivalent to 20
full-time)

Wages $500,000 or $25,000 per full-time
equivalent worker

Employer Health Care Costs: $240,000
 2010
Tax Credit: $28,000 (35% Credit)
 2014
Tax Credit: $50,000 (50% Credit)
How Is The Size Of The Credit Determined?
•
The size of the credit depends on your average
wages and the number of employees you have.
•
The full credit is available to firms with average
wages below $25,000 and less than 10 full-time
equivalent workers.
•
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.
Six Ways Health Reform Will Help Small Businesses
(2) Creates Health Insurance Exchanges To
Increase Bargaining Power and Reduce
Administrative Costs
•
Health Insurance Exchanges will provide
more choice, lower prices, and greater
bargaining power for firms with up to 100
employers.
•
Starting in 2014, firms with 100 or fewer
workers will be able to pool their buying
power and reduce administrative costs by
purchasing through an exchange.
Six Ways Health Reform Will Help Small Businesses
(3) Ends Price Discrimination Against Small
Businesses With Sick Workers
•
Currently, small business with just one sick
worker can face significantly higher
premiums.
•
Health Reform will end this price
discrimination.
•
Starting in 2014, “community rating” rules
will prohibit insurers from charging more to
cover small business with sicker workers or
raising rates when someone is sick.
Six Ways Health Reform Will Help Small Businesses
(4) Increases Health Care Security To Unlock
Entrepreneurship
•
Current health care system locks workers with
families or health problems into their current
job because they can’t afford to lose their
insurance coverage.
•
Health Care reform will eliminate this “job
lock” and free up small businesses to attract
the best workers and encourage entrepreneurs
to strike out on their own.
Six Ways Health Reform Will Help Small Businesses
(5) Reduces The Hidden Tax on Small Business
Employees With Health Insurance
•
Currently, the cost of treating the uninsured
adds a “hidden tax” of over $1,000 to every
health care premium.
•
Health reform will significantly reduce this tax
by covering an additional 32 million
Americans by 2019.
Six Ways Health Reform Will Help Small Businesses
(6) Reduces Premium In The Small Group Market
•
In a recent survey, nearly 75% of small
businesses that did not offer benefits cited
high premiums as the reason.
•
Health reform will lower costs making
coverage more affordable.
Presented by:
Christopher E. Hoyme
[email protected]
10050 Regency Circle, Suite 400
Omaha, Nebraska 68114
(402) 391-1991
(402) 827-4232 Direct
www.jacksonlewis.com