2020 Paycheck Protection Program and Health Care Enhancement Act
How the Act Affects You
On April 24, 2020, President Trump signed into law H.R.266 - the Paycheck Protection Program and Health Care Enhancement Act. This act allocates $483.4 billion for small businesses, hospitals, and testing. It follows three other Congressional acts to help businesses and families impacted by the COVID-19 pandemic, which the CARES Act declared a disaster from Jan. 31, 2020, through Dec. 31, 2020.
Highlights of the Paycheck Protection Program and Health Care Enhancement Act
- $321.3 billion in expanded lending for the Paycheck Protection Program for small businesses, including $60 billion for “unbanked” businesses
- $60 billion in small businesses disaster loans and grants
- $75 billion for hospitals
- $25 billion for COVID-19 testing
- $2.1 billion for the Small Business Administration
What’s In It for You?
The act adds $321.3 billion to the existing $349 billion Paycheck Protection Program (PPP). The PPP is part of the $2 trillion H.R.748 - Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law on March 27, 2020.
The PPP’s original funding of $349 billion was quickly exhausted by Wednesday, April 15. As a result, the Small Business Administration (SBA) stopped accepting new PPP loan applications for 11 days. Over 1.66 million loans had been approved by almost 5,000 lenders, and 74% of them were for amounts under $150,000. It started accepting applications again on Monday, April 27, 2020.
The PPP lends up to $10 million to small businesses with fewer than 500 employees. The loan amount is tied to payroll costs and covers employees making up to $100,000 per year. The time period covered is from Feb. 15 to June 30, 2020, and loan payments are deferred for six months.
Loans through the PPP may be fully forgiven if 100% of the funds are used for payroll, mortgage interest payments, rent, or utilities.
The amount added to the PPP includes $60 billion to fund community development banks and credit unions. Of that, $30 billion is earmarked for loans issued by banks and credit unions with assets of $10 billion to $50 billion. The other $30 billion goes to community banks and credit unions with assets of less than $10 billion. These include community development financial institutions (CDFIs), minority depository institutions, community development corporations, and SBA microloan intermediaries.
With this help, these small credit unions and community banks can then reach out to the “unbanked” businesses that don’t have an existing relationship with a financial institution.
Unbanked businesses include individual proprietors that only make enough to pay their bills. They may not have a banking relationship because they may not make enough money to put into a savings account. Others may operate in neighborhoods where there isn’t convenient access to banks and some people may not trust banks and other financial institutions.
These sole proprietors might be the least likely to receive aid because they don’t have an existing relationship with a bank, so House Democrats wanted to be sure that part of the PPP funds was directed to those that need the assistance most.
The act adds $60 billion for the SBA’s disaster relief programs. Agricultural enterprises of 500 employees or less are now eligible for these programs. As of May 7, 2020, the SBA was only accepting applications from agricultural businesses.
The act allocates $50 billion to the Economic Injury Disaster Loan (EIDL) program, which provides eligible small businesses and nonprofits up to $2 million for working capital. EIDLs have interest rates of 4% per annum or less and have maturities of up to 30 years. Collateral is generally required for loans over $25,000.
Businesses must apply directly to the SBA for EIDLs.
The act also allocates $10 billion to the EIDL Emergency Advance grant program, which provides up to $10,000 per business that lost revenue from the pandemic. It only applies to businesses with less than 500 employees, but these advance loans are actually grants that don’t have to be repaid.
Small Business Administration
The act provides $2.1 billion to the SBA to administer these new loans and grants.
What’s In It for the Rest of Us
The act also sets aside funds for hospitals, testing, and the overall economy. It adds $100 billion to the Public Health and Social Services Emergency Fund, which was established by the CARES Act. That includes $75 billion for hospitals caring for COVID-19 patients. The remaining $25 billion goes to expanded COVID-19 testing capabilities.
The act sends $75 billion to eligible health care providers for COVID-19 related expenses or losses in revenue. Eligible providers are public entities, Medicare- or Medicaid-enrolled suppliers and providers, and other for-profit and nonprofit entities as specified by the Health and Human Services (HHS) Secretary.
Another $25 billion is allocated for COVID-19 testing and contract tracing. This includes supplies needed for testing, such as personal protective equipment (PPE). The money can also be used for staffing and for using non-federally owned facilities.
The act provides over $14 billion to the federal government for testing. This includes:
- $1 billion for the Centers for Disease Control and Prevention
- $1 billion for testing those without health insurance
- $825 million for community health centers, rural health centers, and other health institutions
- $1 billion for the Biomedical Advanced Research and Development Authority
- $6 million for the Department of Health and Human Services inspector general to conduct oversight
The remaining $11 billion goes to states, localities, territories, and tribes for COVID-19 testing. It also requires them to create testing plans for their jurisdictions.
Impact on the Economy
The expanded funding for small businesses will hopefully encourage the rehiring of laid-off workers. Between March 15, 2020, and April 25, 2020, more than 30 million people filed for unemployment insurance. This record level of unemployment has depressed demand, as laid-off workers are forced to cut spending. Businesses can use the funds to rehire workers, which will help keep the economy afloat.
Payments to hospitals will cover losses they endured from having to cancel elective procedures. They also need funding for PPE.
Expanded testing will allow more states to reopen. The White House guidelines recommend states test people who either have coronavirus symptoms or might have contacted the virus. States should also have staff trace all the contacts of an infected person and they should also be tested. Once testing and contact tracing are in place, it’ll be safer for states to reopen.
Other Government Coronavirus Rescue Efforts
This new act, H.R.266, follows three other laws that have already been enacted in response to the COVID-19 pandemic.
On March 6, 2020, H.R.6074 - Coronavirus Preparedness and Response Supplemental Appropriations Act became law. The $8.3 billion act allotted $6.2 billion to the Department of Health and Human Services for vaccine research and the Centers for Disease Control and Prevention received $1.9 billion to distribute to states.
On March 18, 2020, the president signed the $3.5 billion H.R.6201 - Families First Coronavirus Response Act into law. It provided paid sick leave, insurance coverage of coronavirus testing, and unemployment benefits. It also expanded food assistance for the poor and increased Medicaid funding.
On March 27, 2020, the $2 trillion H.R.748 - CARES Act was signed. It provided $290 billion in direct stimulus payments to taxpayers and $260 billion in expanded unemployment insurance. It allocated $510 billion in expanded lending for businesses and local governments. Another $377 billion went to emergency loans and grants for small businesses. CARES also allocated $150 billion for state and local governments and $127 billion for hospitals.
House Democrats are proposing a fifth bill which will include money for states, municipalities, and the District of Columbia. The money would be targeted to fund state and local workers, including public health care workers, emergency responders, and teachers. This is important because states and municipalities could run out of funds to pay them if revenues fall—unlike the federal government, local governments are not allowed to run deficits.
In an interview with Politico, Senate majority leader Mitch McConnell agreed with funding local governments. He also said he hopes to limit the liability of health care workers, businesses, and employees from lawsuits related to reopening the economy.
Congress.gov. "H.R.266 - Paycheck Protection Program and Health Care Enhancement Act." Accessed April 29, 2020.
Congressional Research Service. "SBA Economic Injury Disaster Loans for COVID-19." Accessed April 29, 2020.
Congress.gov. "H.R. 748 - CARES Act." Accessed April 29, 2020.
Congressional Research Service. "Fourth COVID-19 Relief Package (P.L. 116-139): In Brief." Accessed April 29, 2020.
U.S. Small Business Administration. "Statement from Secretary Steven T. Mnuchin and Administrator Jovita Carranza on the Success of the Paycheck Protection Program." Accessed April 29, 2020.
U.S. Small Business Administration. "Coronavirus (COVID-19): Small Business Guidance & Loan Resources." Accessed April 29, 2020.
Federal Register. "Business Loan Program Temporary Changes; Paycheck Protection Program." Accessed April 29, 2020.
U.S. Small Business Administration. "Economic Injury Disaster Loan Emergency Advance," Accessed May 7, 2020.
American Hospital Association. "Special Bulletin: Senate Passes the Coronavirus Aid, Relief, and Economic Security (CARES) Act." Accessed April 29, 2020.
Federal Reserve Bank of St. Louis. "Initial Claims," Accessed April 29, 2020.
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Congress.gov. "H.R.6201 - Families First Coronavirus Response Act." Accessed April 29, 2020.
Congresswoman Nancy Pelosi, California's 12th District. "Transcript of Pelosi Interview on NPR's Weekend All Things Considered." Accessed April 29, 2020.