According to the U.S. government, small business employees today pay an average of 18% more in premiums than those in large firms with the same benefits and their deductibles are more than double.* The underlying cause for this payment discrepancy lies in simple math. Small businesses do not have the numbers to support and spread out the insurance risk leading to greater costs for small business owners. To help small business owners and try to put an end to the insurance bleed out that many business owners are facing, state-based Small Business Health Options Programs or SHOP Health Insurance Exchanges were created with the signing of the Patient Protection and Affordable Care Act (PPACA). These exchanges are a place where small business owners and other uninsured can join together to increase their purchasing power and reduce their premiums.
How will the exchanges work?
Between 2014 and 2016, businesses with up to 50 employees will be permitted to participate in the Exchange. Small businesses with fewer than 50 employees will be exempt from the bill’s shared responsibility requirement. In an effort to cover more small businesses and their employees, these small enterprises will have the option to participate in a Health Insurance Exchange where they can join other businesses to achieve greater purchasing power for lower health insurance premiums and better health coverage.
The Bill also provides $40 billion in tax credits for small businesses. These tax incentives include:
· A sliding scale tax credit for businesses with fewer than 25 employees and an annual wages of less than $50,000 that purchase health insurance for their employees of 35% of the small business’ premium costs. Small businesses with 10 or less employees and annual average wages of $25,000 or less will be eligible to receive the entire credit which can constitute up to 50 percent of the total premium cost. These credits began in 2010 and continue through 2013.
· Non-profits are also eligible for a tax credit worth up to 25 percent of the non-profit’s premium costs between 2010 and 2013. Effective January 1, 2014, the rate increases to 35 percent.
As of this article’s printing, health care exchanges are facing another round of hurdles – more delays in their launch and operations. Scheduled to be up and operational by October 2013 for a January 1, 2014 benefit effective date, the Small-business Health Options Programs (SHOPs) were approved to be self-managed in 18 states with another 17 states schedule to run their own insurance exchanges for individuals. According to a report released on June 22, 2013 by the Government Accountability Office, it looks like those exchanges will be delayed. While good progress has been made in many states, the report revealed that “many activities remain to be completed and some were behind schedule.” Primary areas of concern include enrollment, technological infrastructure such as electronic data interfaces and exchanges (EDI), plan management and consumer education.
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