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What Health Care Reform Means For: Small Businesses

Using results from a questionnaire we did with American Public Media’s Public Insight Network, we’re looking at how the proposed health care reforms will actually affect people facing common health care coverage situations. This is the second in a series (Part 1, Part 3).

Fairfield Lighting and Design, Office Manager Barbara D’Agostino

Location:Fairfield, Conn.Employees:12 (10 receiving health insurance) Sales:$2 million annuallyPayroll:$384,000 annually

Their story:

Fairfield Lighting and Design has been in business since 1972, but it is struggling to cope with tough economic times. It has 12 employees, whose average wage is about $20 an hour. Because of the recession, opportunities to work overtime have dwindled, and the regular hours of some employees have been cut.

The recession has also made it difficult to keep paying their health care costs: Fairfield offers health insurance to 10 of its employees, at a company cost of $550 per employee each month.

The costs to each employee are relatively low. They pay only 20 percent of the premium, or $110 per month. Their co-payments are $15 to see a doctor or $500 for a hospital, and medications cost them $15, $25 or $50, depending on the type of drug.

But that could change. Fairfield Lighting and Design was recently notified that its coverage will be taken over by a new company, probably around the beginning of the year.

“Hopefully when this whole thing goes through maybe we can find something less expensive,” D’Agostino said. “Otherwise the employees may have to contribute a bit more.”

What health care reform would mean for them:

Two of the reform bills require that employers provide some minimum health insurance to employees or pay a penalty. The exception is the Senate Finance Committee bill, which has no employer requirement.

But small businesses are exempt. Because Fairfield Lighting and Design has only 12 employees and a payroll of less than $500,000, it would not be required to provide health insurance under any of the health reform bills.

Each of the three bills gives small businesses tax credits for several years to provide relief from high insurance premiums until more comprehensive reforms are in effect – until 2015 for the House bill, and 2017 in the Senate Finance bill. The Senate health committee bill would offer a credit until state exchanges are up and running -- up to three years. But some plans offer a lot more help than others. The health committee bill would offer Fairfield a tax credit of about $10,000 per year. The others use sliding scales based on employee income, and because Fairfield pays near the top of those scales, it would get a credit of only about $5,000 under the House bill and $2,500 under the Senate Finance Committee bill.

Small businesses would also have the option under all three bills to buy insurance through a health insurance exchange, a pooling mechanism that would allow them to choose from a menu of private plans, which the Congressional Budget Office projects would be cheaper than private plans currently out there for small businesses.

Help won’t arrive right away under any of the proposals. The House bill, which phases small businesses into the exchange based on their size, would make Fairfield wait until 2013. The Finance Committee plan would make Fairfield wait even longer – it won’t set up exchanges for small businesses until 2017. The Senate health committee plan would authorize the Health and Human Services secretary to start giving grants to states to start up health care exchanges right away, but it is unclear how quickly states would move.

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