Upholding the Affordable Care Act is a Win for Small Businesses
June 29, 2012
02:12 PM EDT
02:12 PM EDT
Below are just some of the ways that the Affordable Care Act helps small businesses:
Tax credits for certain small businesses that choose to offer coverage. Small
businesses that have fewer than 25 employees and provide health
insurance can qualify for a tax credit of up to 35 percent (up to 25
percent for non-profits) to offset the cost of insurance. This credit
will increase in 2014 to 50 percent (35 percent for non-profits) for
small businesses newly offering insurance through private insurance
marketplaces called Exchanges. This will dramatically lower the cost of
providing health insurance. These tax credits for small businesses are
already helping cover an estimated two million workers at the
approximately 360,000 small employers who received the credit in 2011.
- For example, Louisa McQueeney, a small business owner in Florida, has already saved $7,400 thanks to the tax credits. You can watch Louisa tell her story here.
Lowering premiums by cutting red tape and increasing competition among insurers. The Congressional Budget Office
estimates the Affordable Care Act would cause premiums would fall up to
4 percent in the small group market, and up to 11 percent for firms
receiving tax credits. Today, administrative costs run as high as 30
percent for small firms, compared with 7 percent for large employers.
- CBO explains that these costs savings would be the result of cutting red tape and more competition: “[small group] policies would have lower administrative costs, on average, than the policies those firms would buy under current law, particularly for very small firms. The primary sources of administrative cost savings for small employers would be the economies of scale and relative standardization of benefits in the exchanges noted above..."
- Spurring entrepreneurship and increasing competition by giving talented workers flexibility to join a small businesses or startup. By making coverage more affordable, thelaw will help spur entrepreneurial activity by increasing the incentives for talented Americans to launch their own companies and help end the phenomenon of "job lock," in which workers are reluctant to leave a job with health insurance out of fear that they will not be able to find affordable coverage when they strike out on their own.
- No insurance requirement for small businesses. Every small business with fewer than 50 employees is completely exempt from the law’s employer responsibility provisions. That means the overwhelming majority – 96 percent of all firms in the U.S. or 5.8 million out of 6 million total firms – of businesses in the country are exempt from the requirement to contribute to the coverage of their employees. Almost all (93 percent)of larger small businesses with 50-199 employees already offer coverage.
Jason Furman is Assistant to the President for Economic Policy and the Principal Deputy Director of the National Economic Council