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Will Health Care Reform Really Help Small Businesses?

May 7, 2010

We all hope so.  The cost of health insurance premiums has skyrocketed more than 130 percent in the past decade, and small business owners could use some help.  Optimistically speaking, that is one goal that the health care reform bill will hope to accomplish – at least slightly.   How, you ask?

First, small business owners who employ less than 50 individuals will not be required to provide health insurance for their workers and there will be no penalty involved if they do not do so.  There will however, be a tax credit available depending on the number and average wages of employees.  The tax credit could cover up to half of the company’s contributions toward insurance premiums.

Second, states will be responsible for setting up small business group buying plans or “state exchanges” also called SHOP exchanges – Small Business Health Option Program. These state exchanges will allow small businesses to be part of a collective pool in order to spread out risk and hopefully make available lower premiums.  If Oklahoma does not set up a SHOP exchange by the deadline (2016), the federal government will provide one.

Unfortunately, the Congressional Budget Office predicts that small business premiums with only fall by 1-4 percent as a result of the exchanges in comparison to what rates would be without the legislation.  Of course all of these predictions will vary depending on how the markets actually react.

Yet to be determined is what exactly these exchanges will look like, what institutional structure they will take shape to, and whether or not this will actually help attain lower premiums with all of the other mandates outlined in the law regarding the elimination of pre-existing conditions and lifetime maximums.

Our Advise: Stay tuned for more updates as they become available. We will continue to stay abreast with all of the new reform laws and the potential implications for small businesses and their employees. Our next blog post will feature a time line for important milestones of health care reform.

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