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Affordable Care Act Levels Playing Field for Small Businesses

By Dr. Linda Burke-Galloway

Action speaks louder than words. The era of scattered efforts is over. Despite the distraction of political chasms, small businesses in America have now received a lifejacket for healthcare in the passing of the Affordable Care Act (ACA). Small business owners and their employees can begin to reap immediate benefits, effective January 1, 2010.

Historically, research demonstrates that small businesses pay an average of 18 percent more than their larger counterparts for the same health coverage. However, the Congressional Budget Office estimates that the tax credits from ACA could provide up to $40 billion for small businesses over the next 10 years, decreasing their health insurance premiums by 8 to 11 percent by 2016.

Small businesses are eligible if they employ less than 25 full-time employees and workers are paid annual salaries of $50,000 or less. Tax credits are calculated based on the number of workers and their average wages.  To qualify for these credits for 2010, small businesses must pay at least 50 percent of their employees’ health insurance premiums. The tax credits give small business immediate help in providing health insurance and up to 35 percent of their premium costs for up to 2 years. According to a report from The Commonwealth Fund, 16.6 million small business employees could benefit from ACA’s provisions this year. These tax credits increases to 50% of premiums paid in 2014 but are limited to two years. Tax-exempt organizations are also eligible for tax credits but at a reduced rate of 25 percent in 2010 and 35 percent in 2014. Want more information regarding the rules for these tax credits? Please visit for more details.

As more of the ACA is implemented, other new options will become available. In 2011, government grants for up to 5 years will be available to eligible employers to establish Wellness Programs for their employees for the promotion of health. Cafeteria plans will also be eligible to these employees to place pre-tax earnings into accounts for medical expenses.

In 2014 small businesses will be able to buy insurance through competitive exchanges, giving them the purchasing power of a large group. They will also have a wider choice of affordable plans including the plans that are offered to members of Congress.

If a small business cannot afford to purchase health insurance for its employees, the employees will be able to purchase their own health coverage from the competitive exchanges and they may qualify for tax credits that will make it affordable. Do you have health insurance and are happy with it? Not a problem. No changes are necessary and you may even qualify for the new tax credit. An additional redeeming benefit of the ACA law is that health coverage cannot be cancelled because of an accident or illness. Effective September 2010, there are no more lifetime limits on the amount an insurer will pay an annual limits will be restricted for employer plans. Both for-profit and not-for-profit small businesses are eligible for these plans.

The ACA has succeeded in leveling the playing field for access to healthcare insurance for small businesses. Let’s do everything in our power to ensure its future success.

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