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Small Businesses

Worthy new business start up never gets off the ground because of health insurance…

Mindy and Eric Spencer, Lehi, UT

The Spencers have been forced to make career and financial decisions based on their access to health care. Eric looked into starting his own general contracting business but ended up dismissing the idea because his family would have lost their health insurance. His wife, Mindy, has Type 1 diabetes and has worked hard to never have a lapse in coverage.

Health insurance dictates jobs and career choices
Mindy and Eric Spencer and their two children live in Lehi, UT. Mindy has had Type 1 Diabetes since she was 7 years old. “I’ve been really careful to never have a lapse in insurance coverage,” says Mindy, “but, it’s been really expensive, especially with COBRA (continuation coverage) plans.”  Each time Eric changed jobs, they worried about where they would get their health insurance. They’ve had to consider if the new job was worth the high COBRA prices they paid in the transition and how the new benefits package measured against their current one.

Eric has always been interested in starting his own business as a general contractor. With a degree in business management and with his extensive background in contracting, he has the perfect skill set. But, the Spencers would have had to buy insurance on the individual market—a market in which Mindy found herself completely uninsurable. “Sometimes I feel like I’m holding him back. Eric can’t do what he really wants to do because of health insurance!” Mindy confides.

The Patient Protection and Affordable Care Act will help the Spencer Family in several ways:

First, as someone with a pre-existing condition: Beginning in 2014, new rules will end medical underwriting and pre-existing condition exclusions. Insurers will be prohibited from denying coverage or setting rates based on health status, medical condition, claims experience, genetic information, evidence of domestic violence, or other health-related factors. Premiums will vary only by family structure, geography, actuarial value, tobacco use, participation in a health promotion program, and age (by not more than three to one).

Second, as a potential self employed or small business owner: Starting this year, businesses with 10 or fewer employees and annual average wages of less than $25,000 will be eligible to receive a 35 percent tax credit. The credit decreases as the number of employees and the annual average wages increase. It is eventually phases out at 25 employees and a $50,000 annual average wage. Nonprofit businesses are also eligible for credits starting at 25 percent. In order to participate, the business owner must pay at least 50 percent of the employee’s premium.

This system will only be in place until 2014, when the state-based exchanges are implemented. At that point, only small businesses that participate in the exchanges will be eligible for the credit, but the credit will be higher—up to 50 percent for private companies and 35 percent for nonprofits. For many small business owners, the passing of health reform means they will finally have a chance to offer affordable insurance not only to their employees, but to themselves as well.