Find Answers on Health Care Reforms

Now that the new health care reform law is here, many of you must be wondering how this affects me and my business. Since many of the rules for the provisions of the reform that will be implemented in 2011 and later have not been written yet, I think you should be asking your broker the following questions about provisions going into effect in 2010.

What Is the New Small Business Health Care Tax Credit, and Does My Company Qualify?

The new small business tax credit, Section 45R of the Internal Revenue Code, offers a tax credit to certain small employers that provide health insurance coverage to their employees. It is effective for amounts paid or incurred after Dec. 31, 2009, and it is not restricted to those with a tax liability.

For a small business to qualify for the tax creditIt must be a small business with fewer than 25 full-time employees:

• Owners and family members are not counted as employees for the tax credit.
• It must offer health insurance coverage to its employees.
  
• The average wages of its employees must be less than $50,000 per year.
  
• It must pay no less than 50% of the employee’s premiums.
  
• Tax-exempt organizations can also claim the credit.
  

How the credit works:

• The maximum tax credit will start at 35% of the health insurance premiums that are paid for by the small business in 2010-2013. The maximum credit will increase to 50% in 2014.
• The business must have 10 employees or fewer and average wages of less than $25,000 to qualify for the full 35% tax credit.
  
• If the business has more than 10 full-time employees and the average wages are more than $25,000 the tax credit will gradually phase out.
  
• The business can claim the credit for 2010 through 2013 and for any two years after that for a total of six years.
  
• The tax credit is claimed on the business’s annual income tax return.
  
• To avoid an incentive to choose a high-cost plan, an employer’s eligible contribution is limited to the average cost of health insurance for small businesses in that state.
  

For more information regarding this small business tax credit, consult with your tax consultant or go to www.irs.gov

If I Like My Current Health Insurance, Can I Keep It?

Individuals and employer group plans that wish to keep their current health insurance policy on a grandfathered basis can only do so if the only plan changes that are made are to add or delete new employees and any new dependents. An exception is made for employers that have scheduled plan changes as a result of a collective bargaining agreement. Once a plan loses its grandfathered status, it will be subject to all of the provisions in the law when they take effect, regardless of how coverage is purchased (either through an exchange or outside of an exchange). Most of the new provisions slated to take effect within six months of enactment will apply to all plans, whether they hold grandfathered status.

How Long Can I Cover My Dependent on My Health Insurance?

Under the new law all group and individual health insurance plans, including self-insured plans and grandfathered plans, will have to cover dependents up to the age of 26 within six months of enactment. This is by Sept. 23, 2010. Dependents can be married and will also be eligible for the group health Insurance income tax exclusion. From September 2010 to 2014, grandfathered group plans will only have to cover dependents that do not have another source of employer-sponsored group coverage.

Scott Leavitt is president of Scott Leavitt Insurance & Financial Services and My Wellchoice+, located in Boise, ID. He was the 2008-2009 president of NAHU. Scott is an expert regarding health insurance and has been quoted in The Wall Street Journal, Newsweek, Inc., Kiplinger’s Business, MSN, Fox Business, and Money Magazine. Scott Leavitt can be reached at 208-377-1428 or toll free at 877-677-1428, www.sleavittinsurance.com.