New programs may help small businesses cut health care costs
The No. 1 issue facing most Maine businesses is how to afford health insurance coverage for their employees. There are several provisions in the Affordable Care Act that help employers insure their work force. In addition, there is a new program in Maine that can help insure part-time workers.
Perhaps the most critical provision in the ACA for small businesses is the small business tax credit. For a small business to qualify for the income tax credit it must:
- cover at least 50% of the cost of single (not family) health care coverage for each employee;
- have fewer than 25 full-time equivalent employees; and
- have employee average wages of less than $50,000 a year.
Between now and Dec. 31, 2013, the maximum credit a small business could receive would be 35% if it offers health insurance as a small business, or 25% if it is a charity. Beginning Jan. 1, 2014, the maximum credits increase to 50% for small businesses and 35% for charities. The amount of the credit is allocated on a sliding scale.
It is important to note that after the insurance exchanges become operational in 2014, the credit is only available to small business owners for the first two years they purchase insurance in the exchange. So an owner could take advantage of the tax credits in 2012 and 2013, then buy insurance in the exchange in 2014 and receive a credit of up to a possible 50% for the next two years. For more information, small business owners can talk to their tax professionals.
Another provision of the ACA calls for a virtual marketplace for consumers and small businesses to shop for the insurance coverage they want. An exchange in Maine will begin operations in late 2013. Businesses will be able to compare plans in an apples-to-apples way and the price, benefits and operations will be transparent. Depending on forthcoming regulations from the federal government, small businesses might be able to band together to negotiate better prices from insurers as well.
Finally, the Part-Time Employee Insurance Voucher Program allows businesses of all sizes to offer the same health insurance coverage to their part-time and seasonal workers that their full-time employees receive. This program is particularly popular with Maine's restaurant and hospitality industry, and is important for the seasonal agriculture and ski-industry work force as well. This program is administered by the Dirigo Health Agency.
The program allows employers to offer low-cost health insurance to part-time employees who:
- earn less than $32,500 annually;
- work between 10-35 hours a week (averaged annually);
- live and work in Maine; and
- have either been uninsured for at least the previous 90 days before applying or had been enrolled in MaineCare.
The only cost to employers is a contribution of at least 5% of the employee's monthly premium. The rest of the premium is paid for by a grant awarded to Maine by the federal government in 2009 and a subsidized contribution by the employee. Financial assistance is given to the employee by DHA on the first of each month through a debit card.
The voucher program is an excellent way to keep valued part-time staff who might otherwise choose a different job offering health benefits. Likewise, it can act as a hiring advantage. By offering benefits to interested part-time and seasonal employees, the employer has a leg up in hiring the most qualified jobseekers.
While the benefits in the federal Affordable Care Act have been designed to help alleviate costs, some Maine small businesses might have already seen an increase in premiums stemming from legislation passed on the state level, Public Law 2011, Chapter 90, which passed the Legislature in May of 2011. The law made significant changes to Maine's insurance code, changes that allow for a broader range of premiums than previously seen. As a result, older individuals and businesses with older employees, especially those in rural areas, might see a significant increase in their premiums due to this new Maine law. This is unfortunate, but the subsidies offered through the Affordable Care Act's exchange might help allay those increases beginning in 2014.
The cost of health insurance continues to be a critical issue for business owners as premiums continue to rise. The Affordable Care Act puts in place a strategy to help business owners now and more so in 2014. It also tackles some of the fundamental causes of ever-rising health costs. For example, insured Mainers, including businesses and their employees, should see reduced hospital costs reflected in lower premiums as hospitals incur lower costs for uncompensated care. These lower costs will result from the reduction in the number of uninsured due to various elements of the ACA.
This is just one of the benefits Maine will see as we insure more Mainers through private and public coverage. A healthy work force will make Maine more productive and is good for Maine businesses and Maine's people.
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