Small business insurance Rx

Three things to watch in this fall's health care reform debate.

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(Fortune Small Business) -- With Democrats and Republicans fighting a death match over health care reform, some small business owners fear that their priorities will get lost in the fray.

"Congress hasn't approached health care reform from a small business owner's standpoint," says Todd McCracken, president of the National Small Business Association. No one knows how the legislative battle will pan out, but here are three crucial health care issues to keep on your radar this fall.

The Penalty Box. What if hiring one more employee saddled your company with tens of thousands of dollars in federal fines? According to legislation before the House, businesses with payrolls as low as $250,000 would pay a 2% tax if they didn't provide health insurance (that would rise to 8% as payroll grew to $400,000). And in early Senate legislation, firms that employ 25 or more workers would have to insure them all or pay a per-employee penalty. Those tipping points could discourage business growth.

The Senate Committee on Health, Education, Labor and Pensions addressed this problem in July, amending its version of the bill to exclude a firm's first 25 employees -- not just firms with 25 or fewer -- from an annual fee of $750 per worker. So putting a 26th employee on the payroll would trigger only one $750 fee -- not 26 of them.

More taxes, please. When did you last request more taxes? Never? Well, there's a first time for everything.

Some entrepreneurs would like to see the federal government put a cap on the value of tax-deductible insurance. Under the current, uncapped system, big businesses can offer deluxe insurance tax-free, which helps them recruit and retain employees.

A tax on premium insurance would generate necessary funding for healthcare reform, limit plans that cover unnecessary procedures and level the playing field for small businesses. Also, Congress could grant self-employed taxpayers the same healthcare deductions as businesses.

Pool power. Small businesses and the self-employed don't have the bargaining power of corporate behemoths. That could change if Congress gives entrepreneurs the right to form insurance purchasing pools. In 2008 and 2009 a bipartisan group of lawmakers introduced Small Business Health Options Program (SHOP) bills to allow such pools.  To top of page

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