Small Business Health Insurance

There have been many changes in the law enacted by the current government to ensure better health care protection. One of these changes concerns small business health insurance. It is intended that by no later than 2014, all states will have to set up small business health option programs, known as SHOP exchanges. This will allow small businesses to pool together to purchase insurance.

Details about the SHOP exchange program
According to the new legislation, a small business is one that has between 50 to 100 employees. The objective of the SHOP exchange program is to reduce the burden of small businesses when it comes to bearing insurance costs. The target is that until the SHOP exchange program is set up, that small businesses with 10 or less full time employees who earn less than $25,000 in annual salaries will be eligible for a tax credit of up to 35% of their health insurance costs. For companies with 11 to 25 workers earning up to $50,000, partial credit would be available. Ultimately the goal is that 50% of costs for health insurance will have the benefit of tax credits and the benefit for small businesses will be that ultimately, their cost of insurance will be reduced by between 8% to 11%t.

This regulation also means that insurers will not be able to set rates or pre-existing conditions and will have to standardize the coverage offered to all employees of small businesses. This is a huge boon to individuals whose coverage has been limited by pre-existing conditions and age, tobacco use and a host of other factors that traditionally meant higher premiums.

For small businesses that are required to purchase insurance, these benefits are tremendous and will encourage the employer as well as employee to contribute to the acquisition of health insurance where the benefits far outweigh the burdens.

Current position on small business health insurance
The reality is that currently, for small businesses, managing health insurance is challenging. Consequently, it is common that small business employees and their families are often those who are not protected by health insurance. Contributing factors for this include the fact that small businesses currently pay an average of 20% more for their health insurance.

In addition, there are geographical factors to take into account. Whilst there are some states that subsidize small insurance plans, there are other states that allow small businesses to apply for insurance as a group, whilst other states may have other means of encouraging small businesses to provide health insurance; and then there are states that provide no specific benefits.

Options for small businesses contemplating health insurance plans
Small businesses should take advantage of these benefits offered by the state and use them as a platform for protecting their employees with health insurance. Therefore, even before contemplating the reforms that are set to kick in by 2014, it may be useful for small businesses to explore the options available to them and their employees, in terms of health insurance plans.

The first step in doing this is to find out what the rules are within the state. This information may be available through state entities, such as the state insurance department, or the local chamber of commerce, but is also available through insurance providers. It will be necessary to speak to several providers in order to draw a comparison with what they offer and how what they offer sits with the state support, and with how much your business can afford to shell out in premiums.

Once you have an understanding of this, then crunch out the numbers to understand what can be provided and what can’t. In terms of offering health care insurance, it may be viable to sit down with your employees to discuss the options that are available and see whether some agreement can be made about how the premiums are to be paid and whether it may be possible for the employee to jointly share the burden.

What you should make out of all these factors
The point is, that health insurance protection is critical for everyone and sometimes it is just about sharing the load. The longer-term benefits of having health insurance are clear and require evaluation. By the same token, the lack of protection in this area clearly has its risks, both to the small business employee and to the employee and his family. Ultimately, it is about striking a balance, and until 2014, the balance needs to be struck by recognizing that health insurance is critical and to find a means of affording the premiums.

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