Pennsylvania's Small Businesses

and Health Reform

SMALL BUSINESSES AND HEALTH INSURANCE COVERAGE 1
In 2008, Pennsylvania had Businesses Offering Health Insurance by Firm Size 3
191,397 private firms with less
Number of Pennsylvania
than 50 employees. There
employees
were approximately 1.35 in firm
million employees in these United States
>1000
firms, making up 25% of the
workforce.
100-999

According to the Medical 25-99

Expenditure Panel Survey
2008's report, only 48.7% of 10-24
those firms offered health
Percent of
insurance to their employees. firms
<10
Additionally, the percentage of offering
Pennsylvania residents insured health
0% 20% 40% 60% 80% 100% insurance
by employers is on the decline.
Between 2007 and 2008, the
number of Pennsylvanians, In 2008, 11% of Pennsylvania's workforce was uninsured.4
insured by employers
decreased, by 1.2%. 2
SMALL BUSINESS PREMIUMS AND CONTRIBUTIONS 5
According to Small Business Majority, 71% of small businesses in Pennsylvania, which provide employee
health insurance, are struggling to do so. 6 Additionally, 87% of the businesses that do not provide
insurance say that they cannot afford it.7
In Pennsylvania, employees in firms with less than 50 employees contribute $638 for single health
insurance coverage and $3,414 for family coverage. This is below the national average of $794 for
single coverage and $3,458 for family coverage. Despite costs that are lower than the national average,
these lower employee contributions come at a high cost for employers. In Pennsylvania, employers in
those firms pay a premium of $4,571 per enrolled employee for single coverage and $12,461 for family
coverage. This is greater than the national average of $4,501 for single coverage and $11,679 for
family. 8
A problem that small businesses face in Pennsylvania is little regulatory control over the rates charged
to small groups by commercial health insurance companies. Thus, the nine largest insurance companies
in Pennsylvania have recently increased their rates for the small business market. Fortunately,
Governor Ed Rendell announced an investigation into the "truly exorbitant rate increases."
Additionally, Governor Rendell has urged the "General Assembly to give the commissioner the authority
needed to stop these rate increases, or we’ll likely see a lot more disruption between now and 2014." 9

Issue Area, Small Business: Pennsylvania Page 1 of 3

National Coalition on Health Care July 2010
 THE PATIENT PROTECTION AND AFFORDABLE CARE ACT (ACA) AND EMPLOYERS
While there is no employer mandate in the ACA, employers with 50 or more
employees will be assessed a fee of $2,000 per full-time employee (excluding the
first 30 employees from the assessment) if they do not offer coverage and if they
have at least one employee who receives a premium credit through an Exchange.
Employer This penalty begins January 2014. Employers with less than 50 employees are
Penalty 10 exempt from the penalty.
Therefore, if a firm, which does not offer health insurance, has 100 full-time
employees, and one employee receives a premium credit through an Exchange, the
firm must pay a fee of $140,000. 11
Employers, with more than 200 employees, that offer coverage will be required to
Mandated
automatically enroll employees into the employer’s lowest cost premium plan if the
Enrollment 12
employee does not sign up for employer coverage or does not opt out of coverage.
Small businesses with average annual wages of less than $50,000 that purchase
health insurance for employees: the ACA provides a tax credit of up to 35% of the
employer’s contribution toward the employee’s health insurance premium, if the
Small Business employer contributes at least 50% of the employee's premium. Small Business
(<25 Majority estimates that 160,700 small businesses in Pennsylvania will be eligible for
employees) Tax the tax credit.14
Credit2010- The full credit will be available to employers with 10 or fewer employees and
2013 13 average annual wages of less than $25,000. The credit phases-out as firm size and
average wages increase. Tax-exempt small businesses meeting these requirements
are eligible for tax credits of up to 25% of the employer’s contribution toward the
employee’s health insurance premium.
Small businesses with an average annual wages of less than $50,000 that purchase
health insurance for employees: the ACA provides a tax credit of up to 50% of the
employer’s contribution toward the employee’s health insurance premium, if the
Small Business employer contributes at least 50% of the total premium cost. The small business
(<25 must purchase coverage through the Exchange.
employees) Tax
Credit 2014 and The full credit will be available to employers with 10 or fewer employees and
later 15 average annual wages of less than $25,000. The credit phases-out as firm size and
average wage increases. Tax-exempt small businesses meeting these requirements
are eligible for tax credits of up to 35% of the employer’s contribution toward the
employee’s health insurance premium.
The ACA creates a reinsurance program for employers providing health insurance
coverage to retirees over age 55 who are not eligible for Medicare until January
Reinsurance
2014. The program will reimburse employers or insurers for 80% of retiree claims
Program 16
between $15,000 and $90,000. Payments from the reinsurance program will be used
to lower the costs for enrollees in the employer plan.

Issue Area, Small Business: Pennsylvania Page 2 of 3

National Coalition on Health Care July 2010
1
Unless otherwise cited: U.S. DEP’T OF HEALTH & HUMAN SERVS. MEDICAL EXPENDITURE PANEL SURVEY (2008), available at
http://www.meps.ahrq.gov/mepsweb/data_stats/summ_tables/insr/state/series_2/2008/ic08_iia_f.pdf (last accessed June 2010). These
figures are from 2008.
2
THE KAISER FAMILY FOUNDATION, statehealthfacts.org. Data Source: Urban Institute and Kaiser Commission on Medicaid and the Uninsured
estimates based on the Census Bureau's March 2008 and 2009 Current Population Survey (CPS: Annual Social and Economic
Supplements), available at http://www.statehealthfacts.org/comparetable.jsp?ind=165&cat=3 (last accessed July 2010).
3
U.S. DEP’T OF HEALTH & HUMAN SERVS, supra note 1.
4
COVER THE UNINSURED, ROBERT WOOD JOHNSON FOUNDATION, U.S. UNINSURED WORKERS, available at
http://covertheuninsured.org/uninsured_workers#map (last accessed June 2010). These figures are from 2006-2007.
5
Unless otherwise cited: U.S. DEP’T OF HEALTH & HUMAN SERVS., SUPRA NOTE 1.
6
SMALL BUSINESS MAJORITY, PENNSYLVANIA SURVEY: SMALL BUSINESSES NEED HEALTHCARE REFORM, available at
http://www.smallbusinessmajority.com/_pdf/fact_PA_survey.pdf (last accessed June 2010).
7
Ibid.
8
U.S. DEP’T OF HEALTH & HUMAN SERVS., SUPRA NOTE 1.
9
Sheila Guilloton, Pennsylvania Insurance Department Investigating Rate Increases Especially Targeting Small Business, THE EXAMINER.COM,
(June 10, 2010), available at http://www.examiner.com/x-11804-Health-Care-Examiner~y2010m6d10-Pennsylvania-Insurance-
Department-investigating-rate-increases-especially-targeting-small-business (last accessed June 2010).
10
THE KAISER FAMILY FOUNDATION, SUMMARY OF NEW HEALTH REFORM LAW (2010), available at http://www.kff.org/healthreform/upload/8061.pdf
(last accessed June 2010).
11
100 full-time employees minus 30 full-time employees = 70. 70 * $2,000 = $140,000.
12
SUMMARY OF NEW HEALTH REFORM LAW, supra note 10.
13
CONG. RESEARCH SERV., SUMMARY OF SMALL BUSINESS HEALTH INSURANCE TAX CREDIT UNDER PPACA (2010) available at
http://www.ncsl.org/documents/health/SBtaxCredits.pdf (last accessed June 2010).
14
SMALL BUSINESS MAJORITY, A HELPING HAND FOR SMALL BUSINESSES 3 (2010), available at
http://www.smallbusinessmajority.org/_pdf/tax_credit/Helping_Small_Businesses.pdf (last accessed July 2010).
15
See CONG. RESEARCH SERV., supra note 12.
16
SUMMARY OF NEW HEALTH REFORM LAW, supra NOTE 10.

Issue Area, Small Business: Pennsylvania Page 3 of 3

National Coalition on Health Care July 2010