Health Reform Step-by-Step: Small Business Tax Credits
The Patient Protection and Affordable Care Act is a long, complicated document that will cause real changes in the way you and your family access and pay for health insurance. Texas Impact is committed to helping you understand the bill and making sure you get the benefits available to you. In the coming weeks we will pick apart the bill-- starting with provisions that go into effect in 2010-- so you can so who will be affected.
Small Business Health Care Tax Credit
Small businesses have struggled for years to provide health insurance coverage to their employees. To help them shoulder the burden of this cost, the federal government is offering tax credits to certain small businesses who offer health insurance coverage to their employees.
The credit will cover up to 35% of the employer's contribution to health insurance, with an increase to 50% on January 1, 2014. About 4 million small businesses throughout the country will benefit from this provision, including an estimated 223,000 Texas businesses.
To qualify for the tax credit, an employer must:
- cover at least 50% of the cost of health insurance for employees
- not have more than 25 full-time equivalent employees
- have annual average wages of less than $50,000
To read more about the tax credit provision, you can visit the IRS website here.
To read about this provision on the health reform website, click here.
To read more about how the healthcare reform bill will affect Texas, click here.
Health Reform Step-by-Step: Extension of Young Adult Coverage
Health Reform Step-by-Step: Temporary High-Risk Pool
Health Reform Step-by-Step: The Doughnut Hole
Health Reform Step-by-Step: Free Preventive Care
"Healthy Texas": Public Reinsurance for Texas
SB 6 by Senators Duncan and Nelson would establish "Healthy Texas," a new program to make health insurance affordable for small employers with low-wage workers. Healthy Texas would use a public reinsurance model like those in use in other states including New York. Texas Impact supports the use of public reinsurance and highlighted this approach in our 2008 report A New Diagnosis.
How It Works:
SB 6 (The Healthy Texas Act) would create the Small Employer Premium Stabilization Fund. This fund would reimburse insurers for large insurance claims made by individuals who have group insurance under the Healthy Texas program. Insurers would have to pay the first $5,000 of a claim, but could seek reimbursement for 80 percent of the cost of claims ranging from $5,000 to $75,000.
To qualify for the program, a business could not have offered group health insurance to employees in the last year. Thirty percent of employees must be at or below 300 percent of the federal poverty level, and to join the program, 60 percent of employees must agree to purchase the insurance. The bill is estimated by the Legislative Budget Board to cost $122.5 million over the next biennium.
A 2007 report issued by the Texas Department of Insurance (TDI) found that while 89 percent of large firms in Texas offer group health insurance, only 32 percent of small firms, those with fewer than 50 employees, offer health coverage to employees. This can be attributed to the increasing costs of premiums, which according to the TDI report, have more than doubled in the last ten years. Small business owners are less able or less willing to pay high premiums; according to a 2004 TDI survey, only 37 percent of these owners are willing to pay more than $100 a month per employee for health insurance.
