Apples and Oranges

In recent days, some in Massachusetts have examined the impact of the state’s health reform law on small businesses, such as this article from the Boston Globe, with some comparing the Massachusetts law to the Affordable Care Act. While both laws share the goal of increasing health insurance coverage, the Affordable Care Act includes a number of features that aren’t found in the Massachusetts law that will do even more to improve our nation’s existing health care system, lower costs and provide significant benefits for small businesses. 

As Administrator for the Small Business Administration, I’ve talked with entrepreneurs and small business owners around the country.  The Affordable Care Act will help address many of the concerns I hear from them and make it easier for them to provide coverage to their workers.

Specifically, the new law:

• Makes millions of small businesses eligible now for tax credits to help them offer health benefits to their employees, and the size of the credits increase over time. Businesses with up to 25 employees that pay average annual wages below $50,000 and provide insurance to their workers can qualify this year for a tax credit up to 35 percent. In 2014, the tax credit goes up to 50 percent. An estimated 4 million small businesses nationwide could qualify for a small business tax credit this year, which will provide a total of $40 billion in relief for small firms over the next 10 years.
• In the years ahead, allows small businesses to more effectively leverage their buying power when they shop for insurance plans. Starting in 2014, small businesses with up to 100 employees will have access to state-based Small Business Health Options Program (SHOP) Exchanges. These Exchanges will include online websites that will make comparing and purchasing health care coverage easier and eliminate much of the administrative work that comes with offering health insurance. The Congressional Budget Office (CBO) has estimated that the Exchanges could reduce premiums by up to 4 percent for small businesses.
• Implements new insurance market reforms in 2014 that will keep insurance companies from increasing premiums for small businesses simply because one of their workers becomes sick, thereby providing stability and predictability to small businesses owners that they do not have today.

Small business owners have been suffering under the weight of high health care costs for too long. In today’s insurance market, small businesses pay 18 percent higher premiums than large businesses and have higher administrative costs. The Affordable Care Act will help reduce the burden on small businesses and help ensure small business owners can continue to extend health care benefits to their employees.

And while it is always important to look back at previous work to reform the health care system at the state and federal level, we should remember that the Affordable Care Act is unlike any reform passed before. Commentators who try to compare the Commonwealth’s law and the Affordable Care Act are improperly comparing apples and oranges.

Karen Mills is Administrator of the Small Business Administration