A MESSAGE FROM MY CONGRESSMAN

April 16, 2010


Dear Friend,



I would like to take this opportunity to highlight the new tax credits for small business owners in the health insurance reform law, along with some of the law's other benefits for small businesses.

Small businesses are the backbone of our economy and I am committed to doing everything I can to help them thrive. Time and again, I have heard from small businesses that skyrocketing healthcare costs are their biggest concern. Since 2000, health insurance costs for small businesses have increased 129 percent. Less than half of America's smallest firms can currently afford coverage and those that can afford insurance pay more for less. Below are a few key aspects of the new health insurance reform law that will make coverage more affordable for small businesses and their employees.


Small Business Tax Credits


Starting immediately, businesses with fewer than 25 employees and average annual wages of less than $50,000 are eligible for a tax credit of up to 35 percent to cover the cost of health insurance. Beginning in 2014, the credit increases to 50 percent of health premium costs, further increasing the savings for businesses. The credit is available for as many as six years for each business.

The credit works on a sliding scale. Businesses with fewer than 10 employees and average wages less than $25,000 a year can receive the full credit. The credit extends - on a smaller level - to businesses with fewer than 50 employees and average annual wages of less than $50,000.

To be eligible for a tax credit, the employer must contribute at least 50 percent of the total premium cost. Some 4 million businesses nationwide are expected to be eligible for the credit this year, including over 13,000 businesses in our region. The Congressional Budget Office estimates that the credit could save small businesses $40 billion by 2019.

A detailed explanation of the tax credits can be found on the IRS webpage.

Health Insurance Exchanges for Small Businesses

Historically, insurance companies have been permitted to charge higher health insurance premiums because of employee health status. As a result, small businesses pay higher rates because they lack the advantage of large numbers of employees over which to spread insurance risk.

Beginning in 2014, individuals and small businesses will be able to purchase coverage through new state-run Health Insurance Exchanges. These Exchanges will give small businesses the opportunity to join a large pool, giving them access to the same quality, affordable coverage that large firms currently enjoy. There are over 14,000 businesses in our region that could benefit from this provision, and about 25 million people nationwide are projected to use the Exchanges.

Greater Flexibility in Coverage Options

Companies with fewer than 50 full-time employees, which make up 96 percent of U.S. businesses, are exempt from the mandate that requires larger enterprises to provide health benefits by 2014. For companies who choose to provide coverage to their employees, the tax credits and Exchanges will help provide business owners with the tools they need to remain competitive.

Small businesses will get prices comparable to larger businesses and the tax credits will help off-set high premium costs that often put businesses at a price disadvantage against competitors who do not provide coverage.

Alternatively, by 2014 small business owners can decide whether to continue to offer group coverage, or let their employees buy their own health insurance through the state Exchanges. Individual employees could buy the coverage they need rather than having the employer choose a group policy that isn't necessarily a good fit for everyone.

As always, my office staff is also available to help connect small business owners with the resources they need to help their businesses thrive. If you need assistance, or have any questions, please do not hesitate to contact my Clarks Summit office toll-free at (866) 846-8124. I also encourage you to visit my website (www.carney.house.gov) for up-to-date information on the health insurance reform law and other government resources for small business owners. Thank you, and have a wonderful weekend.


Sincerely,

Christopher P. Carney
Member of Congress