Help for Vermont’s Small Businesses

Vermont’s health care costs are rising by almost $1 million per day – over $350 million a year.  Picking up this tab is already too big a burden for our families, state programs and local economy to bear.  Times are especially tough for small business owners and their employees, who often go without health coverage because monthly premiums are simply out of reach. But thanks to new federal healthcare reform provisions, help is on the way.
Support for small businesses will be phased in over time between now and 2017. First on the list are tax credits for employers who want to provide their workers with health coverage. Beginning this year, low-wage businesses with less than 25 employees can receive credits as high as 35% of the cost of insuring their employees. In 2014, the maximum credit will rise to 50%. 
According to Families USA, approximately 90% of Vermont businesses in this size bracket will be eligible for some relief.  Of these, over 3,400 will be eligible for the maximum credit. 
The law’s impact on individual businesses will vary based on their size.  Although only the largest companies will be required to provide insurance to their employees, mid-sized firms may see financial penalties if their workers are forced to buy insurance on the individual market.
Here are the key things to know about each level:

Business Size

Required to provide insurance to employees

Eligible for tax credit

Eligible to purchase insurance through the Small Business Health Options Program (SHOP)

Possible financial penalty

Under 25 workers

No

Yes

Yes

No

25 to 50 workers

No

No

Yes

No

50 to 100 workers

No

No

Yes

No

Over 100 workers

No

No

In 2017

Yes

Over 200 workers

 Yes

No

In 2017

Yes

The Small Business Health Options Program (SHOP) will be set up by 2014.  The program’s website will provide businesses with information about all of the possible insurance options available to them with the goal of lowering prices through increased competition between insurers.
All insurance policies sold through SHOP must meet the requirements put in place by the new federal law, including a baseline benefits package, no annual or lifetime benefit limits and coverage for young adults through age 26.  A full list of these requirements can be found on the Federal Health Care information portal at www.healthcare.gov. 
Ninety-eight percent of businesses with over 200 workers already provide insurance so the new law will impact them the least. The federal government requires that they keep covering their workers.
Medium and large sized businesses may face financial penalties if their workers are forced to buy coverage on the individual market using a government subsidy (beginning in 2014) because they can’t afford the company plan.  Penalties will range from $2000-$3000 per worker. More details about this can be found in this report released last week by the Urban Institute: http://www.urban.org/UploadedPDF/412180-ppaca-businesses.pdf
The tax credits are the first of several pieces the new federal reform law to take effect aimed at helping small business keep both their employees and their bottom lines healthy.  These include:
•    Improved consumer protection. Starting in 2014, insurance companies will no longer be allowed to charge higher rates to employees with pre-existing conditions. This will make coverage more affordable for families and businesses alike. •    Cost Control. Next year, insurance companies that offer plans to small businesses will be required to spend at least 80 cents out of every premium dollar on direct medical care.  This will help keep insurance companies from raising rates to cover administrative costs or pad their bottom lines.
Supporting Vermont’s small businesses is essential to reviving our economy, strengthening our communities and ensuring the health of our families.  There is wide agreement that the growing price tag of health care is unsustainable at all levels.  The implementation of common sense federal health care reform combined with Vermont’s ambitious plans for universal coverage has the power to truly revolutionize health care in our state.   But for now, our small business owners and their workers can breathe a sigh of relief, knowing that quality health care is within their reach.