USA Today
What's in it for me? If you run a small business or are self-employed, you probably want to know what's in the health care legislation for you personally. Let's get beyond the rhetoric and the partisanship and look into the details.
The good news: For the first time, there's real help for entrepreneurs. If you can't afford or can't qualify for insurance, you'll have new options starting in 2014. If you're struggling financially – as many self-employed do – you may qualify for a government subsidy or Medicaid. If you have a pre-existing condition, you can't be denied insurance. And – whoopee! — I'm personally going to get a tax credit starting this year. If you offer health insurance to your employees, it's likely you will too.
The downsides: There are no caps on health insurance premiums, so I expect insurance companies to hike rates significantly before they have competition in 2014. If you have more than 50 employees, you'll have to provide coverage or pay a fine beginning 2014. As of 2013, there'll be new taxes on some types of income typically received by successful small business owners.
Bottom line: If you're self-employed or have a business with fewer than 25 employees, it's probably going to be financially advantageous for you to be incorporated or an LLC (limited liability company), provide coverage through the business (rather than buy it individually), and, most likely, purchase through a state-established exchange set up beginning 2014.
So what's in the legislation for your small business or for the self-employed?
•Tax Credit. Starting with 2010 taxes, small businesses with fewer than 25 employees that pay at least 50% of the health care premiums for their employees qualify for a tax credit up to 35% of your premiums (50% after 2014 if you purchase insurance through an exchange). How much of a credit you'll get depends on the number of employees you have and their average wage. Gotcha alert: The tax deduction is not available to sole proprietors, so you may want a different corporate legal form.
•Exchanges. Starting 2014, the biggest potential benefit may kick in with the establishment of Small Business Health Options Programs – or SHOP exchanges. These will enable small companies (up to 100 employees) to pool together to have greater buying power. Theoretically, this should result in lower premium costs and lower New York health insurance quotes.
•Subsidies. Starting 2014, many self-employed will qualify for a federal subsidy to help them afford the cost of purchasing health care. Those earning up to 400% of the poverty level will get assistance, or up to $88,200 for a family of four (at today's poverty level).
•Medicaid. Starting 2014, more lower-income individuals and childless adults would be covered by Medicaid, the federal health insurance plan for the poor. This can be a big help, especially for those just starting a business, without much income, who will have trouble meeting California health insurance quotes.
•Mandatory employer-provided coverage. Small businesses – with fewer than 50 employees – are exempt from mandatory requirements. Businesses with more than 50 employees will be required to provide coverage as of 2014 or pay a fine. That means those of us who provide health care coverage will no longer, in effect, be subsidizing our competitors (whose employees rely on public health services) who don't.
•Mandatory personal coverage. Also as of 2014, you'll be required to have health insurance or pay a fine. If you have to pay more than 8% of your income for the cheapest plan, you're not penalized.
•Pre-existing conditions. Starting June 2010, individuals who have not been able to get insurance because of pre-existing conditions can join a high risk insurance pool. As of 2014, insurance companies can not deny insurance to adults based on pre-existing conditions.
•Adult children. Starting in September 2010, dependent children up to age 26 can be covered on parent's policy
•Lifetime limits. Starting September 2010, there can be no lifetime maximum limits on policies. Also, companies can not rescind policies except for fraud.
•Preventive care. Starting September 2010, coverage must include basic preventive care. As many small businesses can now only afford catastrophic coverage, this may mean additional benefits.
•Taxes. Starting January 2013, if you make over $200,000 (individual) or $250,00 (family), your Medicare tax rate will increase from 1.45% to 2.35%. A bigger potential tax bite may hit small business owners who receive capital gains, dividend, or interest income with an additional 3.8% tax on that income.
•"Cadillac" plans. Starting 2018, employers who provide insurance costing more than $10,200 for individuals or $27,500 per family must pay a 40% tax on the excess cost of the premium. This could be a big burden on small businesses, as many premiums are already at that rate for even basic coverage.
The good news: For the first time, there's real help for entrepreneurs. If you can't afford or can't qualify for insurance, you'll have new options starting in 2014. If you're struggling financially – as many self-employed do – you may qualify for a government subsidy or Medicaid. If you have a pre-existing condition, you can't be denied insurance. And – whoopee! — I'm personally going to get a tax credit starting this year. If you offer health insurance to your employees, it's likely you will too.
The downsides: There are no caps on health insurance premiums, so I expect insurance companies to hike rates significantly before they have competition in 2014. If you have more than 50 employees, you'll have to provide coverage or pay a fine beginning 2014. As of 2013, there'll be new taxes on some types of income typically received by successful small business owners.
Bottom line: If you're self-employed or have a business with fewer than 25 employees, it's probably going to be financially advantageous for you to be incorporated or an LLC (limited liability company), provide coverage through the business (rather than buy it individually), and, most likely, purchase through a state-established exchange set up beginning 2014.
So what's in the legislation for your small business or for the self-employed?
•Tax Credit. Starting with 2010 taxes, small businesses with fewer than 25 employees that pay at least 50% of the health care premiums for their employees qualify for a tax credit up to 35% of your premiums (50% after 2014 if you purchase insurance through an exchange). How much of a credit you'll get depends on the number of employees you have and their average wage. Gotcha alert: The tax deduction is not available to sole proprietors, so you may want a different corporate legal form.
•Exchanges. Starting 2014, the biggest potential benefit may kick in with the establishment of Small Business Health Options Programs – or SHOP exchanges. These will enable small companies (up to 100 employees) to pool together to have greater buying power. Theoretically, this should result in lower premium costs and lower New York health insurance quotes.
•Subsidies. Starting 2014, many self-employed will qualify for a federal subsidy to help them afford the cost of purchasing health care. Those earning up to 400% of the poverty level will get assistance, or up to $88,200 for a family of four (at today's poverty level).
•Medicaid. Starting 2014, more lower-income individuals and childless adults would be covered by Medicaid, the federal health insurance plan for the poor. This can be a big help, especially for those just starting a business, without much income, who will have trouble meeting California health insurance quotes.
•Mandatory employer-provided coverage. Small businesses – with fewer than 50 employees – are exempt from mandatory requirements. Businesses with more than 50 employees will be required to provide coverage as of 2014 or pay a fine. That means those of us who provide health care coverage will no longer, in effect, be subsidizing our competitors (whose employees rely on public health services) who don't.
•Mandatory personal coverage. Also as of 2014, you'll be required to have health insurance or pay a fine. If you have to pay more than 8% of your income for the cheapest plan, you're not penalized.
•Pre-existing conditions. Starting June 2010, individuals who have not been able to get insurance because of pre-existing conditions can join a high risk insurance pool. As of 2014, insurance companies can not deny insurance to adults based on pre-existing conditions.
•Adult children. Starting in September 2010, dependent children up to age 26 can be covered on parent's policy
•Lifetime limits. Starting September 2010, there can be no lifetime maximum limits on policies. Also, companies can not rescind policies except for fraud.
•Preventive care. Starting September 2010, coverage must include basic preventive care. As many small businesses can now only afford catastrophic coverage, this may mean additional benefits.
•Taxes. Starting January 2013, if you make over $200,000 (individual) or $250,00 (family), your Medicare tax rate will increase from 1.45% to 2.35%. A bigger potential tax bite may hit small business owners who receive capital gains, dividend, or interest income with an additional 3.8% tax on that income.
•"Cadillac" plans. Starting 2018, employers who provide insurance costing more than $10,200 for individuals or $27,500 per family must pay a 40% tax on the excess cost of the premium. This could be a big burden on small businesses, as many premiums are already at that rate for even basic coverage.
