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Small businesses buying more health insurance

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But pushback from small businesses is marching in lockstep with this increase, stemming in part by the increased insurance costs they’re facing.

| November 3, 2010

More small businesses are expected to offer health insurance to their workers this year because of a tax credit in the new health insurance reform law, researchers believe. But many small business owners still are opposed to the law.

The percentage of companies with between three and nine employees that are offering health insurance has increased to 59 percent this year, up from 46 percent last year, according to a report from Bernstein Research that is based on September survey by the nonprofit Kaiser Family Foundation.

But pushback from small businesses is marching in lockstep with this increase, stemming in part by the increased insurance costs they’re facing. These employers have been socked with double-digit premium increases, which insurers attribute in part to the costs of complying with the new law.

Small Business employers aren’t the only ones feeling the pain from rising costs; workers now dig deeper in their own pockets for coverage as well. About one in four workers now face annual deductibles of $1,000 or more, the Kaiser data show, including nearly half of those employed by small businesses

They are also facing additional paperwork under the law, particularly the nearly universally-hated 1099 compliance requirement. Resistance is rapidly marshalling: the National Federation of Independent Business (NFIB) has joined hands with 20 states that have sued to challenge the constitutionality of the Patient Protection and Affordable Care Act.

The NFIB says that its members have reported that increasing healthcare costs is their No. 1 problem since 1986.

Nonetheless, small businesses will benefit from portions of the law, which includes a tax credit starting this year that covers as much as 35 percent of a company’s insurance premiums.

The full credit is available to companies with 10 or fewer full-time workers with average earnings under $25,000. The credit gradually phases out and is capped at companies with 25 employees with average annual wages of $50,000. The Obama administration estimates that 4 million companies will qualify for the credit.

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