How Health Reform Affects Small Businesses

The new health care reform law offers savings to some small business owners. But others, like ATAS owner Dick Bus, would save more money by ending health insurance benefits and paying the government a $750 per employee penalty. Bus would save $390,000 anually. The Senate is looking to raise the penalty to close that loophole.

More than half of all American workers are employed by businesses with fewer than 100 employees. Forty-six percent of them get their health insurance through work. The rest have to look elsewhere for coverage.

Will companies still offer insurance under the new health care law? CBS News correspondentJim Axelrod looked into it for our User's Guide to Health Care Reform - and found that it all depends on size.

Special Report: Health Care Reform

Last year, Allentown, Pa., businessman Dick Bus saw his health insurance costs spike 33 percent - a trend that will quickly make providing coverage unaffordable.

The new law seeks to limit those kinds of increases, while giving businesses incentives to cover more workers.

Here's how:

Businesses with fewer than 25 employees that pay an average of no more than $40,000 will get a tax credit - up to 35 percent of the company's share of their total health care premium.

Companies with 26-49 workers are unaffected.

Businesses with 50 or more workers must offer coverage or pay $750 per worker. That penalty applies for every employee if even one signs up for government-subsidized insurance.

But there are potential problems. Case in point: It would be much cheaper for Dick Bus to drop the generous coverage he now offers and take the hit at $750 a head for his 120 workers. The penalty would be $90,000 a year. He's currently spending $480,000.

Bus would save $390,000, but canceling his plan would force his workers to the health plan exchange and could cost more than they're paying now. The Senate is considering an increase in the $750 penalty to prevent that scenario.

The law's benefits are clearer for Fank Hesch and the four employees at his auto shop. He provides insurance for two, and pays $4,800 a year. Under the new law, he would get a tax credit of $1,680 and he says he would roll the money into health insurance for new workers as his business grows.

At the Lehigh Valley Zoo, CEO Rick Molchany pays $189,000 to insure 21 workers.

"Our health care is in excess of 10 percent of our annual operating expense," he said.

As a non-profit, the zoo gets a smaller credit for insurance than other businesses. The savings - about $9,000.

When you add it all up, most small businesses could save up to 4 percent on what they pay for employee health insurance.

Nationally, that savings could exceed $10 billion.

More Details of the Bill:
Summary of What's in the Bill
Uninsured? What the New Bill Means for You
Already Insured? Get Ready to Pay More
Feds Eye Big Savings from Health Reform
How Health Reform Affects Small Businesses
Provisions Which Take Effect in Short-Term
Read the Text (PDF): Complete Senate Bill | Reconciliation Measure

  • Jim Axelrod
    Jim Axelrod

    Jim Axelrod is the chief investigative correspondent and senior national correspondent for CBS News, reporting for "CBS This Morning," the "CBS Evening News," "CBS Sunday Morning," and other CBS News broadcasts.