Small businesses face unique challenges obtaining affordable, quality health insurance for their employees. Small businesses are getting less value for their dollar in purchasing insurance—they spend an average of 18 percent more than large businesses for comparable coverage.1 This is in part because small businesses lack the market power to negotiate with insurers for favorable insurance rates and terms—and the fewer employees a business covers, the higher its premiums are likely to be.2 Small businesses also face higher administrative costs, which have been estimated to consume 27 percent of premiums for the smallest of businesses, compared to just 9 percent for businesses with 100 employees or more.
Health reform will improve small businesses’ ability to provide their employees with the quality health insurance they need and deserve. New health insurance exchanges will improve competition, which will give small businesses more market power and provide them with access to better value health insurance options. Health care reform will also create new health insurance tax credits targeted at the smallest businesses facing the steepest challenges to covering their employees.
This calculator can help determine the premium subsidy a small business would receive under the House bill, HR 3200, as amended by the Energy and Commerce Committee.
HR 3200 and Small Business
HR 3200 provides small business with tax credits equal to up to 50 percent of the employer’s share of the cost of purchasing health insurance coverage for employees. Small businesses are more likely than large employers to pay a significant share of their employees’ health insurance premiums—40 percent of businesses with fewer than 200 employees pay all of the cost of individual coverage compared to just 10 percent of larger businesses.3 These credits are offered on a sliding scale for small business with up to 25 employees earning an average of $40,000 a year. The size of the tax credits are based on three things: how much the employer spends on health benefits, the average employee wages, and the number of employees.4
- Interactive Calculator: Health Care Reform and You
- Video: How the Health Insurance Exchange Really Works
Jon Gabel and others, “Generosity and Adjusted Premiums in Job-Based Insurance: Hawaii is Up, Wyoming is Down,” Health Affairs, 25, no. 3 (2006): 832-843. back to text
Association of Health Insurance Plans Center for Policy and Research, “Small Group Health Insurance in 2008: A Comprehensive Survey of Premiums, Product Choices and Benefits,” March 2009. back to text
The Kaiser Family Foundation and Health Research and Educational Trust, “Employer Health Benefits: 2008 Annual Survey,” September 2008. back to text
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