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While many small business owners criticize the new federal health care insurance law and a key small-business group joined a lawsuit that seeks to overturn the law, Dottie Li is among those keeping an open mind.

Li, managing director of Transpacific Communications, a Cheverly company that provides people from other countries and cultures with skills needed to succeed in American business and society, said she plans to review aspects such as tax credits that could help her small business lower health care costs.

"It sounds like it will help small businesses like mine," she said this week after hearing U.S. Rep. Judy Chu (D-Calif.) speak about the measure. "Anything that can be done to help lower health insurance costs is very much appreciated."

Over the past decade, average annual family premiums for workers at small businesses nationwide increased by 123 percent, from $5,700 in 1999 to $12,700 in 2009, according to the U.S. Small Business Administration.

That has led to fewer businesses, especially small ones, offering employees health insurance. About 44 percent of Maryland companies with fewer than 50 employees offered insurance in 2008, down from 47 percent in 2005, according to the Kaiser Family Foundation. Maryland's average for small companies in 2008 was slightly above the national average of 43 percent.

The health reform law, passed in March, will help more small business owners offer employees health insurance by reducing costs through tax credits and other provisions, said Chu, who spoke Tuesday at the Asian American Business Conference in Rockville.

"This reform is good news for small businesses," Chu said. "It will lower health insurance costs."

Others aren't so sure the law will do that. Many Maryland business owners who Julie Lenzer Kirk works with are not convinced that the prices will really come down, she said. Kirk formerly founded a Germantown information technology company and is now CEO of the Path Forward Center for Innovation and Entrepreneurship, a nonprofit that aids women in starting and growing their own companies.

"I have heard several owners of start-ups state that they would prefer to use subcontractors, rather than hire, because of the cost and the hassle," Kirk said.

SBA: $40 billion in tax relief over decade

An estimated 4 million small businesses nationwide could qualify for the tax credits this year, and the program is expected to provide a total of $40 billion in relief for small companies over the next decade, according to the Small Business Administration.

Small employers with fewer than 25 full-time equivalent employees and average annual wages of less than $50,000 that purchase health insurance for employees are eligible for tax credits. Employers must contribute at least 50 percent of the total premium cost.

While the credit won't help Jan Naylor, president of hardware store chain A.D. Naylor & Co. of Oakland in far western Maryland, since her company has 80 employees, she could benefit by joining a Small Business Health Options Program Exchanges, designed to pool small companies' purchasing power and hopefully reduce rates.

Her company's health insurance costs as a percentage of payroll increased to almost 16 percent in 2006 from half that in 1997. She had to tweak coverage and offer a high-deductible plan, which reduced costs somewhat.

"I'm hoping something will help us get some rate relief," Naylor said.

Critics say the tax credit proposal is not structured to allow for long-term relief and won't help as many small businesses as advocates believe. The law also creates new mandates, paperwork and costs, they say.

"The federal government has really simply gone too far with this law," said Karen Harned, executive director of the National Federation of Independent Business' Small Business Legal Center. "The individual and employer mandates in the law, the onslaught of new taxes, the paper requirements and the new rules are dramatically going to increase the cost of doing business."

At least one economist sides with the NFIB. "The new health care law will add huge costs to employers and higher premiums for individuals," Peter Morici, a business professor at the University of Maryland, College Park, said in a recent report. "Voila, even fewer dollars for consumers to spend on U.S. goods and more businesses offshoring jobs."

Facing a penalty

Starting in 2014, employers with more than 50 employees that don't offer health insurance to workers will face a penalty. That and an individual mandate to purchase health insurance are key ingredients that recently led the NFIB to join a lawsuit challenging the constitutionality of the law.

The employer mandate won't impact Naylor's Hardware since the company offers health insurance, Naylor said. She previously endorsed the Maryland Health Care for All Coalition that would implement a 2 percent payroll tax on businesses. She said the tax would have been offset by lower health insurance premiums that the plan would have brought through a statewide insurance pool that will result in better volume-discount rates.

The new law is still designed to do that with its program exchanges, Naylor said. Small businesses face premiums that are 18 percent higher than what large businesses pay because large companies have more purchasing power to gain lower rates, according to the SBA.

"With more companies in the system, the idea is that we can negotiate for better rates," Naylor said.

The state of Maryland has offered small businesses subsidies to pay for health insurance since late 2008, but not many have signed up. As of last December, there were 221 businesses in the plan, according to the Maryland Health Insurance Partnership.

The plan is designed for small employers with two to nine full-time employees that have not offered health insurance to employees during the previous year and have an average annual employee salary below $50,000. The program offers a subsidy of up to 50 percent of the insurance premium, which is divided between the employer and the employee based on the contribution each makes toward the cost of coverage.

Businesses that receive health care tax credits from the state of Maryland will also be able to qualify for the federal credit, federal officials say. Dental and vision care also qualify for the federal credit.

How it works

U.S. Patient Protection and Affordable Care Act provisions:

An estimated 4 million small businesses nationwide could qualify for a small business tax credit this year, while the program is slated to provide $40 billion in relief for small companies over the next 10 years, according to the U.S. Small Business Administration. Small employers with fewer than 25 full-time equivalent employees and average annual wages of less than $50,000 that purchase health insurance for employees are eligible for tax credits.

What NFIB says

The National Federation of Independent Business says of the new bill:

The small business tax credit will do little to make purchasing insurance more affordable for small companies since it is poorly structured and won't provide sustainable and long-term relief from high healthcare costs. Fewer than 1.8 million small businesses will qualify for the health insurance tax credit, the number that offer health insurance and pay more than 50 percent of their employees' insurance costs. The average payroll limit of $50,000 will likely exclude a significant number of those businesses.

By the numbers

The number of uninsured Americans increased to 46.3 million in 2008 from 45.7 million in 2007, according to the U.S. Census Bureau. However, the number of uninsured in Maryland declined to 669,000 in 2008 from 762,000 in 2007.

About 58 percent of Maryland private businesses offered employees health insurance in 2008, down from 60 percent in 2005, according to the Kaiser Family Foundation. Maryland slid to 16th nationally in 2008 from 11th in 2005, as the national average remained at 56 percent.

About 44 percent of Maryland companies with fewer than 50 employees offered insurance in 2008, down from 47 percent in 2005. Some 99 percent of those with 50 or more employees did so, up from 97 percent in 2005. The national average was 96.5 percent for larger businesses and 43.2 percent for smaller ones in 2008.

Over the past decade, average annual family premiums for workers at small businesses increased by 123 percent, from $5,700 in 1999 to $12,700 in 2009, according to the U.S. Small Business Administration. Small businesses face premiums that are 18 percent higher than what large businesses pay.

To learn more

Maryland Health Care Reform Coordinating Council, 410-455-6854, www.healthreform.maryland.gov

U.S. Department of Health and Human Services, www.healthreform.gov

Maryland Health Insurance Partnership, 877-245-1762, mhcc.maryland.gov/partnership

Many Maryland chambers and other business groups have sponsored forums to inform members about the act. The Greater Bethesda-Chevy Chase Chamber of Commerce has scheduled one for 8 a.m. Monday at the National 4-H Youth Conference Center, 7100 Connecticut Ave., Chevy Chase. For more information, call 301-652-4900.