Providing health insurance for employees is a very powerful tool for attracting and retaining highly-skilled employees. Unfortunately, for many small businesses, doing so can be quite expensive.
Larger business organizations generally pay nearly 20 percent less per employee for health benefits, which makes it difficult for small businesses to offer competitive benefits. However, recent changes to health care legislation may level the playing field.
In addition to providing tax credits of up to 35 percent, to help small businesses provide affordable health insurance, the new laws allow for the establishment of health insurance exchanges. These new health insurance marketplaces are designed to provide small businesses with the kind of purchasing power heretofore reserved only for large business organizations.
So how exactly will these health insurance exchanges work? When do they start? And how will they affect your small business?
Competition Is Good for Business
Businesses with up to 100 employees will be able to shop for health insurance options in health insurance exchanges, starting in January 2014. These SHOP (Small Business Health Options Program) exchanges will be a marketplace where insurance companies compete to win the patronage of small businesses.
Competition tends to drive prices down, and lower health insurance costs are one of the projected benefits of these SHOP exchanges.
Up to the States
The Affordable Care Act gives each state the right to establish their own health insurance exchanges, which would have the benefit of being run by health insurance authorities that are well-acquainted with the specific insurance needs of businesses and consumers in their area.
While many states have indicated that they will form their own health insurance exchanges, some states have declined to participate, largely for political reasons. Business owners in those states can utilize a partnership exchange, or join the federal exchange instead.
Businesses with 100 or fewer employees will be eligible to purchase health insurance policies from the exchanges, starting in 2014. Individuals are also eligible to participate, bringing affordable health care within the reach of both freelancers and the self-employed.
Will Your Business Be Required to Offer Health Insurance?
In short, no. Additionally, small businesses with fewer than 50 employees will be exempt from paying employer responsibility requirements. These fees are only levied against large employers that do not offer affordable health coverage to their employees, currently less than four percent of all U.S. businesses.
The funds collected via employer responsibility requirements will be used to offer tax credits to low- and middle-income families, in order to offset their health insurance premium costs.