The Affordable Care Act
In March 2010 the Patient Protection and Affordable Care Act was signed into law. This sweeping healthcare reform legislation addresses serious problems small business owners face, including skyrocketing healthcare costs, lack of access to affordable coverage and little choice among health plans.
The new law will be implemented over a five-year period (2010-2014) to avoid disruption to the existing system and make the transition as smooth as possible. It will build upon the existing employer-based system, but reform it in a manner that reins in costs for small businesses.
State health insurance exchanges
One of the biggest changes small firms will see is the creation of state health insurance exchanges. The law requires that each state set up these marketplaces by 2014 (if the state doesn’t establish one the Department of Health and Human Services will create one for it), where small businesses can pool together and purchase health insurance at a lower rate. This will expand choice and competition in the health insurance market and give small businesses the kind of clout large employers currently have when negotiating for coverage.
Read more about health insurance exchanges in our healthcare FAQ
Cost containment
The Affordable Care Act also addresses the system-wide increase of costs, and includes several cost containment measures that will reverberate across the entire system and cut healthcare costs for all consumers, including small businesses. It cracks down on waste, fraud and abuse in Medicare and Medicaid programs—which results in higher premiums that hit small business owners’ pocketbooks. The new law has a Medical Loss Ratio provision that requires insurers to spend a minimum of 80% of premium dollars on healthcare, rather than administrative costs like exorbitant CEO salaries and marketing campaigns. The nonpartisan Congressional Budget Office (CBO) predicts the law will cut the federal government deficit by $143 billion through 2020 and by $1 trillion the following decade.
Read more about cost containment in our healthcare FAQ
Tax credits
Healthcare reform also saves small business owners money immediately through tax credits. Small businesses that pay at least 50% of their employees’ health insurance premiums and have less than 25 full-time workers with average annual wages below $50,000 are eligible for tax credits up of to 35% of their healthcare costs. This provision is designed to give small employers some financial relief from high healthcare costs, and more than four million small businesses nationwide qualified for this credit in 2010.
Read more about the health insurance premium tax credit
Use our online tax credit calculator to determine if you qualify
Get more information from our tax credit study
Grandfathered plans
Additionally, the law enables small businesses to keep their current plan if they like them, as long as they don’t make any significant changes in coverage. If any major plan are made, the plan can no longer keep its grandfathered status—which means that all the new consumer protections introduced with reform will apply.
Read more about grandfathered plans in our healthcare FAQ
These are just some of the many components of the Affordable Care Act that address small business owners’ No. 1 concern: rising healthcare costs. The law includes a variety of other measures that will indirectly cut down on expensive premium costs and help expand access to quality, affordable health insurance for small businesses and the millions they employ.
DOWNLOADS |
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 What’s in Healthcare Reform for Small Businesses? (PDF) |
Healthcare law overview by Small Business Majority |