Finance and Law

Health Insurance Exchanges and The Future of Small Businesses

The Patient Protection and Affordable Care Act (PPACA) of the Obama Administration is a landmark law that aims to overhaul the U.S. healthcare system. Its main goal is to provide affordable health care and reduce the number uninsured Americans. The law has several provisions designed to improve coverage including mandates, subsidies, and tax credits.

Health insurance exchanges

A major component of PPACA, also referred to as Obamacare, is the creation of Health Insurance Exchanges (HIX). These exchanges will be the new marketplace where individuals and small employers can access affordable health insurance available in their state. This marketplace will be fully operational starting Jan. 1, 2014.

The goal of these exchanges is to provide a transparent and centralized marketplace where individuals and small employers can come together and negotiate health coverage as a group. The aim is to make the plans more affordable by giving consumers greater buying power. Each state may choose to operate their own Exchange or allow the federal government to operate one.

Open enrollment will start on Oct. 1, 2013 and officials have already begun certifying health plans that will be offered on these exchanges. Beginning Jan. 2014, these exchanges will serve individuals and small businesses to enroll in health insurance.

With a fully operational HIX, individuals and small employers can compare policies and premiums, and purchase coverage. They can also find out if they are eligible for a government subsidy.

The exchange is also tasked to provide Small Business Health Options Program (SHOP) to help businesses facilitate the enrollment of their employees and dependents in health plans available in the small group market. The effect of the new law on small businesses will depend on the number of employees the company has.

Companies with 1 to 24 employees

The health care reform offers tax relief to self-employed individuals or businesses with less than 25 employees. Small companies which shoulder their employees’ health coverage can qualify for tax credits of up to 35 percent of their premiums. Starting 2014, the credit could be as high as 50 percent if the business purchases health insurance through the exchanges. The tax credit will depend on the number of employees and their average salary. However, this tax break will not be available to sole proprietorships. This may prompt very small businesses to incorporate or become an LLC.

Companies with 25 to 49 employees

Starting 2014, companies with less than 50 employees are not required to offer health insurance to their workers. These companies are exempt from coverage provisions but may have to face rising premiums.

Companies with 50 to 100 employees

The new law will have a great impact on businesses with 50 to 100 employees. These companies are required to provide health coverage to all their workers or pay a penalty of $750 per employee.

Experts worry that employers might choose not to provide their employees with health insurance and pay the penalty instead. Employees of these companies can purchase health insurance coverage through their state’s health insurance exchanges. It remains to be seen whether the increased insurance costs will result to lay-offs and fewer hiring leading to higher unemployment.

This article was contributed by Vista Health Solutions, New York based insurance agency that specializes in affordable health insurance for individuals, families and the self-employed. For more information, visit the Health Insurance Exchange guide.

By Simon Bukai

Simon Bukai owns and operates Vista Health Solutions, a health insurance marketplace. Vista Health Solutions provides helpful advise and valuable insight to consumers looking for the best health insurance solution.
Simon's experience in the industry has made him knowledgeable on many health and insurance related topics.