U.S. Senator Olympia J. Snowe (R-Maine), chair of the Senate Committee on Small Business and Entrepreneurship, has introduced the “Small Business Health Insurance Relief Act of 2006,” (S. 2457) legislation that seeks to provide incentives for small businesses to offer affordable health insurance coverage to their employees.
“There are too many Americans struggling to afford basic health insurance, and now is the time that Congress must demonstrate its commitment to action by passing substantive legislation that will provide meaningful relief to our nation’s small businesses,” said Senator Snowe. “Despite the fact that they are responsible for creating nearly 75 percent of all new jobs, our nation’s small businesses are trapped in a vicious cycle of escalating health care premiums and fewer coverage options. It is a crisis that will only deepen if Congress does not act now and pass legislation that addresses the small business health insurance crisis.”
She maintained that her legislation would use the tax code to encourage our nation’s smallest businesses to offer health insurance. “It also would inject much needed competition into dysfunctional state small group markets,” she added. “It’s an opportunity to offer innovative new incentives that will drastically shrink the ranks of America’s nearly 46 million uninsured without significantly expanding the health care bureaucracy.”
Snowe noted that the Kaiser Family Foundation’s Employer Health Benefits 2005 survey found only 47 percent of the smallest employers, those with 3 to 9 workers, now offer health insurance as a workplace benefit. This is down from 52 percent in 2004, and 58 percent in 2002. In sharp contrast, 98 percent of larger businesses, those with 200 or more workers, offered health insurance as a benefit.
The Small Business Health Insurance Relief Act of 2006 would:
• Provide a targeted tax credit to small businesses with 50 or fewer employees who provide health insurance or a health savings account (HSA) to their employees. The tax credit focuses on the smallest businesses, who are least likely to offer health insurance to their employees. The full credit ($1,500 for single coverage/ $3,000 for family coverage) would be available to small businesses employing fewer than 10 employees. The credit percentage would be phased out for larger firms.
• Allow small businesses to offer cafeteria plans to provide employees with nontaxable benefits. Many large companies and the Federal government currently offer cafeteria tax plans to enable their employees to purchase health insurance and other qualified benefits with tax-free dollars. However, small businesses face difficulties in offering cafeteria plans because they, through no fault of their own, are unable to satisfy strict, mechanical nondiscrimination rules. This proposal would allow small businesses, which are willing to make a minimum contribution for all employees or are willing to match contributions, to waive otherwise applicable non-discrimination rules. The proposal also liberalizes”use it or lose it rules” applicable to flexible spending accounts.
• Provide tax incentives for insurers who provide products in the small group market or offer Small Business Health Plans (SBHPs). The proposal would reformulate the current-law tax treatment of income derived from the health businesses of property and casualty insurance companies. Under the proposal, an insurance company could claim a 50 percent tax deduction with respect to its health business in small group markets. The deduction would be available to all insurance companies operating in small group markets, without mandating onerous regulatory barriers that exist under current law.
• Provide a tax credit to cover administrative costs and expenses incurred in satisfying state licensing requirements to offer health insurance to small businesses. The proposal would allow any insurance company making use of the incentive above to claim a tax credit equal to the lesser of 50 percent of eligible expenses or $10,000 to cover the administrative costs and expenses incurred in satisfying state licensing requirements to offer insurance in the small group market. Available with respect to each state in which an insurer operates, this credit would defray a significant barrier to entry and spur more insurance companies to compete in state insurance markets.
• Establish a pilot grant program for Small Business Development Centers (SBDCs) to provide educational programs to small businesses designed to increase awareness regarding health insurance options available in their areas. Recent research has found that with a short education session, organizations can increase small business knowledge and interest in offering health insurance by 33 percent.
Source: Sen. Snowe
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