Although the $856 billion health care reform plan introduced Wednesday by Senate Finance Committee Chairman Max Baucus will not require employers to provide health coverage benefits, the plan will reinforce competition within small group markets by offering state-based exchanges, co-ops and tax incentives to small businesses.
Similar to proposed individual market exchanges, small businesses would have access to state-based Small Business Health Options Program (SHOP) exchanges. These exchanges would be web portals that "make comparing and purchasing health care coverage easier for small businesses." The proposal would also provide a tax credit to small businesses offering health insurance. In 2011 and 2012, eligible employers would be able to receive a small business credit for up to 35 percent of their contribution.
Once the exchanges are up and running in 2013, according to a statement released by the Committee on Finance, qualified small employers purchasing insurance through the exchanges can receive a tax credit for two years that covers up to 50 percent of the employer's contribution. Small businesses with 10 or fewer employees and with average taxable wages of $20,000 or less will be able to claim the full credit amount. The credit phases out for businesses with more than 10 employees and average taxable wages over $20,000, with a complete phase out at 25 employees or average taxable wages of $40,000.
Recommended For You
The bill also creates the authority for the formation of the Consumer Owned and Oriented Plan (CO-OP). These plans – which will require $6 billion of federal seed money for start-up costs and solvency requirements – can operate at the state, regional or national level to serve as nonprofit, member-run health plans to compete in the reformed non-group and small group markets, according to the committee. These plans will offer "consumer-focused alternatives to existing insurance plans." Employees offered coverage by their employers at 13 percent or more of their income will be eligible for a health care affordability tax credit.
Larger businesses offering no coverage will have to reimburse the government for employees receiving tax credits. As of Jan. 1, 2013, employers with 50 or more employees that do not offer health insurance will have to reimburse the government for each full-time employee receiving a tax credit. The tax credits would be available beginning 2013 to low and middle-income individuals and families between 134 percent and 300 percent of Federal Poverty Level.
"All employers with more than 50 employees who do not offer coverage will have to reimburse the government for each full-time employee (defined as those working 30 or more hours a week) receiving a health care affordability tax credit in the exchange equal to 100 percent of the average exchange subsidy up to a cap of $400 per total number of employees whether they are receiving a tax credit or not," the committee stated in a press release.
The proposal also calls for a so-called Simple Cafeteria Plan through which small businesses can provide tax-free benefits to their employees.
"This change would ease the participation restrictions and include self-employed individuals as qualified employees," the committee said.
Qualified long term care insurance would is also allowed to be provided under a cafeteria plan so long as the amount of contributions doesn't exceed the eligible long term care premiums for the contract.
Other employer-related mandates include:
- Increasing Transparency in Employer W-2 Reporting of Value of Health Benefits – This proposal would require employers to disclose the value of the benefit provided by the employer for each employee's health insurance coverage on the employee's annual Form W-2. This would be effective beginning in 2010. This proposal has a negligible revenue impact over ten years.
- Limit Health FSA Contributions – This proposal would limit the amount of contributions to health Flexible Spending Accounts (FSAs) to $2,000 per year, beginning in 2013.
- Eliminate Deduction for Employer Part D Subsidy – This proposal would eliminate the deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees. This would be effective beginning in 2011.
- Standardize the Definition of Qualified Medical Expenses – Beginning in 2011, this proposal would conform the definition of qualified medical expenses for Health Savings
- Accounts (HSAs), health FSAs, and HRAs to the definition used for the itemized deduction. An exception to this rule would allow amounts paid for over-the-counter medicine with a prescription to still qualify as medical expenses.
- Increase the Penalty for Use of HSA Funds for Non-qualified Medical Expenses – This proposal would increase the additional tax for HSA withdrawals prior to age 65 that are not used for qualified medical expenses from 10 percent to 20 percent, beginning in 2010.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
