Small Business Health Reform Legislation Introduced

July 29, 2008

On July 23, House Small Business Committee Chairwoman Nydia Velazquez (D-NY) and Representative Joseph Pitts (R-PA) introduced the Small Business Cooperative for Healthcare Options to Improve Coverage for Employees (CHOICE) Act of 2008 (H.R. 6582). The legislation would allow small businesses to form health insurance purchasing cooperatives under State law for the purpose of insuring against the risk of high-costs or catastrophic claims. Small businesses can currently form cooperatives, but this legislation would encourage businesses to participate in the cooperative through a 65 percent tax subsidy.

Under H.R. 6582, eligible employers also would have to subsidize at least 65 percent of individual health coverage and up to 35 percent for family coverage, as well as offer a wellness program. Employers who previously did not offer subsidized health insurance would receive a 5 percent bonus tax credit. Tax credits would be available to companies with no more than 100 employees.

The Cooperative works by providing excess claims coverage insurance to small business members through its captive insurance company. The captive insurance company pays benefits when the annual maximum for the policy purchased has been exceeded. The annual maximum for the policy purchased can be no less than $10,000 and no more than $250,000 per insured person in paid claims.

A cooperative is formed when an association or financial cooperative organization of persons with a common affiliation choose to incorporate under any State’s captive insurance laws, and has no fewer than 100 members and 5,000 lives or meets minimum capital requirements established by the Secretary of Treasury.

While NSBA is focused on broad and comprehensive healthcare reform, these efforts must be commended. NSBA is continuing discussions with Chairwoman Velazquez to reform our nation’s health care system to provide for affordable, accessible and quality health care for small business owners and their employees.