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Small Businesses

"We’re a small company, and since we’ve been operating, health costs seem to go up about 20% each year. We’re left with a tough decision… either keep providing health insurance as it is, or reduce the coverage."

 Todd Swensen, Word Assembly

Todd established Word Assembly in 1999. With only three employees – himself, his business partner, and an office manager – Todd often finds his company suffering more than others do because of rising health care costs. Currently, Todd is able to provide coverage for Word Assembly’s three employees, but regrettably not for the four or five freelance writers he consistently contracts with.

 Rising health care costs affect profitability…
“We’re a small company, and since we’ve been operating, health costs seem to go up about 20% each year. We’re left with a tough decision… either keep providing health insurance as it is, or reduce the coverage.”  In the past eight years, Todd has done both.

Strict eligibility requirements hurt employees and their families…
According to the law, HMO’s have to offer small businesses coverage, but they still come to us every year saying that because of one of our employees’ health histories, they can jack the prices 85% up above the baseline rate. We want to become part of a larger insurance pool so that doesn’t happen. Todd sees how not having health insurance is negatively affecting the lives of his freelance writers, too. Health insurance guidelines are so strict. There should be something like a pseudo-company that would draw them into their own insurance pool. Freelancers have it really tough.

Cost of coverage affects ability to attract and retain employees…
Todd feels that offering health insurance to the freelance writers he contracts with would greatly benefit his business, but the high cost of coverage does not make this a viable option. Hiring our freelance writers in-house would be a great benefit to the business, but we just can’t afford it. It would allow them to be more involved in the company, more invested in the success of the business, and it would give better continuity to our clients. Not being able to provide health care is one of the top three reasons we haven’t hired the writers on.

The Patient Protection and Affordable Care Act will help
Todd Swensen and his business in several ways:

First, as a 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.

Second, for Todd’s employees who have 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).