For any Illinoisan who may have put aside their dream of starting a small business for fear of losing or not being able to afford health insurance coverage, it’s safe to start dreaming again. Illinois small businesses are getting some financial relief from the recently enacted health insurance reform signed into law by President Obama on March 23, 2010. This will be of great help as small businesses’ health care costs have grown 129% since 2000. Luckily, President Obama had small business owners in mind when he signed the health insurance reform bill into law. He said, “I’m signing it for Ryan Smith, who’s here today. He runs a small business with five employees. He’s trying to do the right thing, paying half the cost of coverage for his workers. This bill will help him afford that coverage.” And the thousands of Ryan Smiths in Illinois will see many benefits from the new law. Here are some of the main benefits:
Right away many Illinois small businesses—and an estimated 3.6 million total small businesses nationwide—will get a tax cut this year to help them pay for health insurance for their employees. This tax credit starts at up to 35% of the money the small business owner spends on premiums for employees and increases over time, eventually reaching 50% when the Insurance Exchanges go into effect in 2014. Nonprofit organizations also qualify, starting at 25% and increasing to 35% of the employer contribution. In this way, small business owners who choose to provide health insurance to their employees will be able to do so more affordably and can stop worrying about rate hikes.
By 2014, small business owners will also have access to the new Small Business Health Options Program (SHOP) Exchanges so they can find the best deal through a simple and efficient process. Funding will be given to the states through January 1, 2015 to establish these Exchanges within one year of enactment. In the Exchange, small businesses with up to 100 employees (states can limit to 50 employees) can purchase qualified coverage.
This Exchange will greatly assist small businesses, which have been paying up to 18 percent more than large companies for the same health insurance policy. The independent and non-partisan Congressional Budget Office found that premiums for small businesses will go down. The larger pool leads to more insurer competition and lower administration costs, thereby increasing affordable insurance options. And the larger pooling structure will protect small businesses from sudden, arbitrary rate hikes because a worker gets sick. For those small business employees and self-employed who are currently excluded from coverage due to a pre-existing condition (and who have been uninsured for at least six months), right away there will be a temporary high risk pool established to guarantee coverage.
Small business owners will benefit greatly from the new law. With dollars freeing up due to the tax credit, new competitive insurance marketplace and other health cost savings, small business owners will be able to reinvest in and grow their organizations, offer increased salaries to employees, hire new employees and retain quality employees.