Small businesses, on average, pay up to 18 percent more in health care premiums than do large firms for the same health insurance coverage.
Insurers charge smaller companies higher administrative costs for health coverage, since they typically assess whether each person in such a “small group” is insurable based on his or her individual medical history. The consequence is that employees of America’s small businesses are considerably more likely to be uninsured than their counterparts working at larger organizations.
Provisions in the Affordable Care Act aims to address some of the factors leading to this disparity.
One such provision is a tax credit targeted to small businesses. Starting this year, employers with 10 or fewer full-time employees that have average wages of up to $25,000 are eligible for the maximum credit of 35 percent of the amount the company contributes toward its employees health insurance premiums, with the credit applied to the employer’s tax liability for the year. Companies eligible for the credit employ 16.6 million workers, with experts estimating that businesses employing 3.4 million of them (about 20 percent) will take the credit between 2010 and 2013. The federal government has notified 4 million companies that they may be eligible for the credit.
This Health Policy Brief examines the ACA's coverage provisions aimed at addressing some of the factors leading to this disparity, and was published online on January 14, 2011 in Health Affairs.