The landmark health care case decided last week by the Supreme Court is being discussed and assessed by employers throughout the country. Both sides of the debate agree that the health care bill is the largest income-redistribution program enacted in decades. It collects taxes from the prosperous and offers new Medicaid benefits to the near poor and provides sliding-scale subsidies to a broad range of families earning below the median income.
Today we will look at the Pro side of the debate.
Proponents of the Patient Protection and Affordable Care Act contend that it contains substantial benefits for small businesses. First, it offers special subsidies to firms with fewer than 25 employees that want to offer health benefits. As long as your employees earn less than $50,000 on average, you currently can get a tax credit to defray 35 percent of the cost of the insurance if you are a for-profit firm, and 25 percent if you’re a nonprofit. In 2014, those subsidies are scheduled to rise to 50 percent for for-profits and 35 percent for nonprofits.
Firms with fewer than 50 employees are also exempt from the “employer responsibility” provision of the law that otherwise constitutes the biggest business burden in the legislation. The Patient Protection and Affordable Care Act requires that all individuals who don’t receive insurance from their employer or from a government program such as Medicare or Medicaid must buy their own insurance on a regulated exchange. Subsidies will be provided to those for whom such insurance would not be affordable. That could be seen as penalizing firms that already offer insurance to their workers. To offset this, the law stipulates that companies whose employees receive subsidies to buy exchange plans must pay a financial penalty. That is supposed to deter firms from responding to the law by simply dropping existing insurance coverage. According to proponents, the PPACA does not require small businesses to pay that penalty. Fans of the new law believe that by putting the special subsidies and the exemption together, it is a good deal for small businesses.
More generally, proponents believe that the bill will encourage the formation of new smaller firms. Insurance is based on the concept of pooling risks, and the PPACA sets up large statewide risk pools where anyone, regardless of health status, will be able to buy affordable coverage. They believe that will this will encourage the creation of new businesses.
How do you believe the PPACA will affect your business?
Next week: What happens if you own a medium to large business?