Today, the Treasury Department is releasing more details on the ways small businesses will benefit from health insurance reform. Rising health care costs have been the biggest concern for small businesses for decades. But as a result of the Affordable Care Act, we are already putting in motion steps that will reform the health insurance system so it works for small businesses, rather than strap them with continually rising costs.
One of the many ways the new law is helping small businesses is through tax credits starting this year. These credits will help small business owners provide health insurance to their workers – by giving back up to 35 percent of the employee premiums they pay starting this year. Just as important, today’s announcement made clear that small businesses may receive state health care tax credits and still qualify for a federal tax credit. In addition, today’s announcement clarifies that dental and vision coverage qualify for the credit.
With this announcement today, I’m reminded of a woman small business owner I met in New Jersey last summer. She said to me that the day she was able to provide health insurance for her staff was the day she knew she was a success. But rising costs forced her to cut back on the coverage and even put her at risk of not being able to provide coverage at all for her employees. That’s why these tax credits are so important. It will mean she and countless other small business owners across the country can do what she thinks is best for her employees and for her business.
An estimated 4 million small businesses may qualify for a credit, which will provide about $40 billion in tax relief over the next 10 years. Already, the IRS has sent out millions of postcards to small business owners connecting them with tools to help them to determine their eligibility for a federal tax credits this year.
In 2014, the maximum tax credit will increase from 35 to 50 percent and small business owners will also have the chance to access affordable plans through health insurance exchanges. These exchanges will be a marketplace where small businesses can pool their risk together and spread it more broadly, while reducing their administrative costs.
It’s important to note that the Affordable Care Act also will help small businesses in other ways.
For example, rules will prohibit insurance companies from dramatically increasing premiums for a small business just because one worker gets sick. Also, by outlawing discrimination based on pre-existing conditions, the Affordable Care Act will make it easier for small businesses to compete for quality workers, as well as allow more Americans to break out of “job lock” and start their own business. Read more benefits of the Affordable Care Act for small businesses here.
Overall, the Affordable Care Act will provide entrepreneurs and small business owners with lower costs and more tools to provide health insurance for their employees, whom they often think of as members of their own family. We owe them nothing less as they work to grow, create jobs, and lead us toward full economic recovery.
Karen Mills is Administrator of the Small Business Administration