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Health Reform May Make Cheap Health Insurance Possible for Small Businesses Posted: December 1st, 2009

By Sanford Ellowitz

Sanford Ellowitz is a New York State licensed insurance agent. He is also a Certified Financial Planner and a Certified Employee Benefit Specialist. He has over 25 years experience in the insurance and financial services industries.

Two provisions in the health care overhaul, a national Health Insurance Exchange and a tax credit, are designed to help small businesses get cheap insurance for their employees .

Cheap Health Insurance for Small Businesses May Be Possible Through Health Reform

According to a November 2009 Reuters article, small businesses now employ about 40% of the nation's workforce. Despite employing a growing proportion of the labor force, small businesses are likely to face a 15% rate hike to their health insurance premiums in the coming year.

High Costs for Small Businesses

An October 2009 report issued by Kathleen Sebelius, Health and Human Services Secretary, estimated that small businesses pay up to 18% more than larger businesses for the same health insurance coverage. This difference in cost might be attributed to higher broker costs and administrative fees.

The Result of High Costs for Small Businesses

While 98% of large businesses offer health insurance coverage, only 46% of small businesses do. The cost of health insurance can be troublesome for many small businesses. In fact, three quarters of the small businesses that do not offer health insurance cited high costs as the main reason they do not provide the benefit to their employees.

Employees that do not receive health insurance benefits from their employers often resort to finding coverage in the individual marketplace. Individuals looking for cheap medical insurance must contend with high premiums or forgo coverage altogether.

Help For Small Businesses

As the health care reform effort is currently being debated in Congress, two provisions have the potential to directly help small businesses: the Health Insurance Exchange and tax credits.

The national Health Insurance Exchange is intended to provide a health insurance market for individuals without coverage. The goal is to lower costs by pooling individuals, who previously had to buy insurance on their own, together so that they have greater purchasing power. Competition in this model is meant to be enhanced by allowing insurance to be purchased across state lines. In 2013, the Health Insurance Exchange may be opened to small businesses, and to larger businesses at a later date.
The second provision is a tax credit of up to 50% of the cost of providing health insurance to employees.

Other Measures to Make Insurance More Affordable

As part of the overhaul, several other provisions will be implemented to help control costs. Insurers will no longer be allowed to deny coverage or charge higher premiums for pre-existing conditions or health status. Making health insurance more widely available will result in better outcomes and cheap health insurance.

Sanford Ellowitz