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September 2010

Health Care Reform And Your Business

Publication Date: 
May 2010

How the New Law Will Impact Your Bottom Line

Now that health care reform legislation with a true price tag of nearly $2 trillion is the law of the land, many small business owners are asking how they will be impacted. The answer is to expect higher costs and more mandates.

Mandates. The new law forces small businesses to provide health insurance whether or not they can afford it. Beginning in 2014, employers with more than 50 employees will be required to offer coverage or pay a $2,000 fine per employee if just one employee receives a subsidy to purchase insurance through newly created state health insurance exchanges. A firm’s first 30 employees will be subtracted from this penalty payment calculation.

Even businesses with more than 50 employees that do offer health benefits will face a $3,000 fine for each full-time employee who opts out and receives a subsidy to purchase coverage through an exchange. Part-time employees are taken into account as full-time equivalents, defined as working 30 hours per week. The total employer penalty is capped at the maximum penalty amount it would face if it did not offer any coverage at all. An employer plan must cover a specific set of services to be determined by the government and meet actuarial standards laid out in the law.

It is estimated that nearly 220,000 small businesses employing more than 26 million workers could be subject to the employer mandate. As premiums rise, some businesses will decide that it makes sense to drop coverage and pay the fine. The Joint Committee on Taxation estimates that employers will pay $52 billion over 10 years in penalties for noncompliance. The Congressional Budget Office (CBO) projects that 3 million fewer Americans will be covered through employer plans in 2019.

Exchanges and Tax Credits. By 2014, states are required to offer insurance exchanges where small businesses and individuals can purchase coverage. Through 2016, the exchanges are restricted to small businesses with no more than 100 employees, but states will have the option of limiting pools to companies with 50 or fewer employees. State benefit mandates will apply to plans sold through the exchange.

From 2010 to 2013, small businesses with fewer than 25 employees who on average earn less than $50,000 per year will be eligible for tax credits paying up to 35% of their insurance costs. This credit, however, will do little to blunt new costs for businesses that previously did not provide coverage. For example, a company that pays $40,000 a year to insure its employees will still be faced with $26,000 in unsubsidized costs. The tax credit grows to 50% of insurance costs in 2014, but it disappears completely two years later.

Taxes and Fees. The bill imposes $569 billion in new and higher taxes on businesses and individuals. New taxes on pharmaceutical companies (beginning in 2011), medical devices (beginning in 2013), and the health insurance sector (beginning in 2014) will be passed on to every American in the form of higher prices and premiums. Beginning in 2018, a 40% excise tax will be imposed on employer-sponsored health premiums that exceed $10,200 for single coverage and $27,500 for family coverage.

Upper income earners are targeted for additional tax hikes. Beginning in 2013, the Medicare payroll tax will increase 0.9% for individuals earning more than $200,000 ($250,000 for married couples filing jointly). That equals an extra $2,250 per year in taxes for a family earning $500,000. Further, income thresholds are not indexed annually, meaning that every year more taxpayers will be subject to the payroll tax increase.

Those same households will face a 3.8% Medicare tax applied to net investment income, which captures income from interest, dividends, capital gains, and some profits from investments in partnerships and S-corporations.

In addition, the law curtails several positive features of the health care system designed to promote individual initiative and private sector efficiency. For example, caps on tax-free Flexible Spending Accounts (FSAs), which are used to reimburse some medical bills not covered by insurance, have been cut in half to $2,500, and over-the-counter medications will no longer be considered a qualified medical expense.

Learn more at www.uschamber.com/healthcare.

Comments

Craig S. Russell, DC 5/6/2010 1:40:26 PM

Medicare reimbursement for my Chiropractic Services have been steadily dropping while Medicare costs are rising. My employee and personal insurance rates are climbing while the reimbursement is dropping, my patients are losing thier jobs. I can not raise my rates due to regulation of usual and customary constraints and as a result my 10 years in practice are on the verge of collapse. I have always had a strong ethical practice with very satisfied patients, yet I don't know if I will survive this travisty of governmental take over. How did this happen so rapidly without us even voting it in? What happened to our freedom?Where is the USA that I have grown to know and love? (Marysville, CA)
Ayesha Chaudhry 5/6/2010 1:59:23 PM

Must clarify that the cap for dependent care FSAs is not affected by the new law. Also the comment that cap on health care FSA has been cut in half to $2,500 is somewhat misleading since currently there is no cap (each employer sets its own cap and contributions are subject to non-discrimination testing). Last but not least, it would be helpful to know the average contribution to the health care FSA under current law (doubt that a majority of employees are even contributing up to $2500). (Fairfax, Virginia)
anthony page 5/6/2010 2:19:38 PM

For years the health care system in this country has been broken. Overcharging and medicare fraud is the norm. Hospitals, doctors and other medical providers encourage patients to have unnecessary tests, surgeries, screnings etc. All of this and our mortality rate in the US in some cases is far below other countries which have socialized medical care.
Today the US spends more money on medical care per capita than any other free world country. The problem is we spend it on the wrong things. Some hospitals in this country look like resorts, and some medical professionals earn more money in 6 months than the average person earns in a life time.
Basic health care should be a right in this country and available to all
US citizens. (Yorba Linda, Ca)
Lynda 5/7/2010 10:40:57 AM

To Yorba Linda, Ca resident,

Rights do NOT include health care. What gives you the Right to spend my earned income? Read and comprehend the Constitution and Bill of Rights of the United States of America before you make unfounded statements. (Lisle, ILlinois)
eddie 5/6/2010 2:58:02 PM

This article is actually quite misleading. The bill passed requires everyone pay for some sort of insurance to avoid penalty; just like most states require for auto insurance, to help pay the bill of the uninsured. Unlike auto insurance, you can't opt out by not having a car, everyone will at some point use the healthcare system. There are penalties for not following through, but these do not affect businesses with less than 50 employees and it is easy to avoid the penalties if you are affected by their thresholds. It would be nice if the Chamber would post a comprehensive and accurate article on the subject instead of a fear tactic of half truths blatantly attempting to discredit the reform. (Lynchburg, Va)
Don 5/6/2010 6:36:50 PM

I have a small businees with over 100 (129) employees. The employer mandate will require that I provide the government mandated insurance coverage for all of our employees. We are currently paying approx $70,000 for health insurance. Our insurance agent estimates that the expected insurance coverage will cost us in excess of $350,000 that would force us to close our business.
If we pay the penality of $2,000 per employee, that $240,000 will also break us. That option would force our employees (if we were still in business) to go to a government backed system. Where is the money for that to come from?
Any tax credit of 35% (or whatever) would be worthless to us as we would not owe any taxes (having a negative net taxable income).
The dirty little secret of this entire system is the government expects industry to pick up the tab for this insurance and that is not included in the $2,000,000,000 project cost. Government as usual. (Tacoma, WA)
Mark C 5/6/2010 11:03:57 PM

Mr. Page wrote "It would be nice if the Chamber would post a comprehensive and accurate article on the subject instead of a fear tactic of half truths blatantly attempting to discredit the reform."

I agree!! It would be great if we could get real subjective analysis of the provisions for this bill with out all the gloom and doom. Give me facts not opinion. If the Chamber cannot or willnot provide us with this information then what good are they? They are just part of the political machine that got us in this mess.

One point, if the cost of labor overhead increases due to the requirement that all most business will have to provide coverage, the price of good and services will increase to offset the increase in the expense. Since all employees of all employers will be offered insurance coverage the increase in burden should be fairly equal across the board.

Additionally, the Bill does not mandate that the employer pay for 100% of the cost. The big question is how much is the premium for the "state health insurance exchange" coverage. As long as the employee contribution is equal to or less than the cost of the "state health insurance exchange" premium, the employer should have 100% employee participation, which should reduce the cost per employee. Again if this results in a net increase in labor burden then the company will have to increase their prices for goods and services to offset the increase in costs. So ultimately the American consumers will be the ones to pay for this Bill.

The good news is we have a few years to get the kinks worked out. I suggest we elect a group of people who are willing to get things done and do more than posture for their political party. (Myrtle Beach, SC)
Corey Steinmetz, CIC 5/7/2010 2:23:40 PM

What the Chamber has published here is in no way an all inclusive article, this is simply a small portion of the bill in and of itself. I understand where the Chamber is giong, but can you imagine writing a comprehensive article outlining a bill that is over 2,000 pages long. Get off the Chamber's back, they are trying to open people's eyes about how this will effect small business.

How can you call this health care reform??? No provisions in this bill layout price reforms for medication, you can go to Mexico and buy the same drugs as you can here, for 25% of the cost, Canada is cheaper as well. You get treated at a hospital and if you have insurance you pay $20 for a tylenol, what in this health care bill changes this? I realize, the uninsured cause some of this, but what about fraud and bogus lawsuits.

Why did our government refuse to listen to the people in regards to these changes? This is not intneded to help the people as much as it is intended to control the people. Anyone who wants to be controlled may as well give the government all of their income and ask them how to live!!

Get real people, open your eyes. I am an Insurance Agent and have been for the last 15 years, selling health insurance, I know what it is in this bill, more than most people, good luck enjoying life like you have in the past, it WILL change. (Torrington, WY)
Sue Vue 5/7/2010 2:28:29 PM

I have a 4 year old home care business that sends caregivers to the homes of the elderly. I employ 50 caregivers who work part-time only. Should I reduce the number of hours that my caregivers want to work to 29/wk? That will surely make them happly--less work, less money. Or should I pay the $2000 fine for not providing health care for the 20 that the government says I have to pay for? Hmmm....that's $40,000 from a business that made about that much last year. That's great, I'll just take a pay cut and have $0 income. Okay, if that's not suitable, how about if I raise my costs to my clients...you know...."gouge" the very individuals whose business I depend on. I'm sure they won't mind paying twice as much per hour so I can keep my caregivers working and get a semblance of an income....Oh! I forgot! The elderly are on fixed incomes and can't afford those higher rates either......what's a small business to do...... (Hickory, NC)
steven Holloway 5/8/2010 10:25:42 PM

All I know is that I feel an ill timed health care bill was rammed down our throat with little or no voter input. It has wide ranging implications for my business. The cost to my employees, the general public and the government is staggering. I worry that the cost to provide health care will not come down. I fear that freedom of choice as well as available quality healthcare providers will diminish. Employers should never have been put in the position of having to make decisions offering and or providing health care to employees. We do it only to attract and retain good people. I flew to Washington at my own expence to hear President Obama speak on his health care initiative only to hear a campaign type speech filled with rhetoric and very short on substance. I for one can't wait to make my feelings known at the ballot box this year. (Albany, GA)
Damaris 5/9/2010 11:08:01 AM

I am 100% with the response from Corey Steintmez. This huge secretive bill passed without our input and consideration to people's voices is what we will be digesting for the next generations. I cannot believe there are people out there still dreaming and thinking this bill is all rosy and will help society in general.

The worst part is that no one mentions that this country has a mentality based on "lawsuits" for anything. How are lawsuits addressed in this new bill? In other socialized countries, as some people compare this system, do not have this mentality and you do not sue anyone especially if getting health care for free. Lawsuits are the major cause of high health care costs over the years. How do we know costs are not going to continue rising with the new socialized rosy Obama/Pelosi health care.

In reference to Anthony Page in Yorba Linda, CA I want to point out that the US spends over $18 billion dollars last year at the expense of tax payers on medical research compared to the European Union that only spent $3.7 billion. We bring the best in research, medical treatments, and more to others globally. Additionally, US lead in many medical treatments especially on cancer and heart treatments.

If the mortality rate is lower as you compared to other socialized medical countries (please get your numbers on mortality) is because of other factors. Have you considered your diet, life style, others?

Regarding your comparisons in general you are comparing apples and oranges. A doctor spends thousands and thousands of dollars and many years of furthering their education in order to save lives. I would expect them to make more money that someone who has not put the time, effort, and studies to be doctors. The main reason of high charges is because the liability insurance doctors have to carry which is astronomically high (again because the system allows us to sue for anything- and we can guarantee jobs for hungry lawyers who make laws and sit in political seats dreaming and implementing socialism like Obama).

This Obama bill is a way to conduce to socialism. It is disguised as a compassionate program however this is only the beginning to take away our freedom, choices, for the government to control us - to control what this country was based on. It will increase costs and quality will diminish. If you do not believe this I recommend you will go and live for a awhile in in one of those countries where there is socialized medicine or there are all the things you envy from those countries. Perhaps, that's where you may live longer and happy! (Fayetteville, ARkansas)
Shannon 5/11/2010 5:28:25 PM

While there is no way for us to know the full effect of this bill I don't know why anyone thinks that is unusual. Most bills are like that and have been for many years. This bill will help some and hurt some. That has also been true for the bills that came about long before 2010. The reason people generally start complaining is because the political party they are not a member of is the one who backed the bill. I recently read some history regarding FDR's push to get Medicare . It was the same kind of uproar we have now over healthcare yet the same people who are against healthcare are yelling don't take our Medicare away. That is hypocritical. One "socialist" program is good enough for you but one is not??? Get real. Be honest enough with yourself to realize that most of the time the reason you don't like something the goverment does is because it's not your party doing it. If it were you would find a way to defend it. (I didn't say all people, I said most)

Greed is the real problem. A company making a profit is a great thing but a company make mega profits at the expense of those they are supposed to be serving in sinful. I know a physician who told me that his continuing education classes were very little about learning new things to help his patients. They are mostly classes in how to bill more to the people and their insurance companies, how to acquire the latest medical testing equipment so that the doctor may charge more even when these tests are not necessary. This goes on most everywhere in our country. IF we followed the Golden Rule we would not have the majority of problems that we have now. If we followed the Golden Rule the government would not be drawn into such things that we as a society should be able to handle ourselves. Sadly our country is ruled by Greed not the Golden Rule.

(Sharon, Torrington, WY)
Gordo 5/12/2010 3:54:15 AM

I would guess that most people responding to the articles written on this bill have not taken the time to read, interpret, and understand the entire 2000 plus pages of this bill. I have only read parts of it and many articles from different view points on the subject. I watched the president of our country badger, intimidate, threaten and bribe the membership of his party to vote for this bill to get it passed. It was not matter of what is good for the general public. This bill is not about Health Care Reform. The passing of this bill is an effort to make us all reliant on the government to survive. It is about power and control over the people. It is a giant step towards a socialist state.

A friend of mine, an attorney from Washington, DC, commented to me that for individuals, employers, and the medical community to comply with many of the requirements of this bill, their actions would be in direct conflict with The Bill of Rights. I foresee many legal battles as they begin to impliment this bill.

Sue Vue asked what she should do about her home health care business. In Wisconsin we have several private not for profit corporations that are funded by state money and Medicare money to provide managed health care to those elderly and disabled that can not afford to take care of themselves. They were created to reduce the cost of the Health and Human Services Department across the state. The counties in which these corporations operate now have only a few social workers who have almost no funds to work with. The health care of these elderly is determined largely by cost justification, not by the needs of the individual. If the person or the persons family challenge the system the person is expelled from services for some technical excuse. The object is to provide the minimum care possible as long as it appears the person is not being neglected. There is no regard for maintaining the dignity of the person receiving care. The system works well for the 80% of the people that are too timid to raise any issues. The Health Care Reform Bill that was passed this year is for "MANAGED CARE" in the long run. Some one in government will decide what care you are eligible for. When the cost to keep you alive is deamed to be more than your worth to society they will take away your will to live and let you die. The only way to avoid that situation is to work smart enough and be responsible enough to put enough money away that you are not ever dependent on the government for your care.

My recommendation to you, Sue is to find 8 or 10 people who can afford to pay what you need to make a good living with only a few employees so you do not need to provide health insurance. Pay for a state plan when one comes available in 2014. Fit that into your pricing so you still make a good income. Find a secondary business that doesn't require employees. Build the new business, one with no employees and a hi income, while your home care business is still viable so you have an income source when home care is no longer your passion..

If you look at the "TIMELINE" for the implimetation of this bill, in 2010 there are some good things for the people, imposed on insurance companies regarding coverages they must priovide and cancelations they can't do. Extending family coverage on children until they are 26 so they don't need to become responsible for themselves. Designed to make us all feel good about this bill and forget that the people who were elected by the majority to represent us, turned their backs on us by passing this bill against the wishes of the majority of the people.

In 2011 the Pharmacutical Industry will be assessed $2.5 billion in fees (TAXES). Who will really pay that? The consumer most likely, through higher prices on medication, larger co-pays, and increased health insurance costs. How does this help reduce our medical costs? Cost reduction is what the American people want in health care reform.

2012 is a Presidential election year. Amazing! There is nothing happening with regards to the Health Care Reform Bill. The President and his representatives want us all to forget what they did to the citizen's of the US in 2010.

Why do you think most of the tax increases, that will impact all of us one way or another, come into play in 2013 and later? Obama can't be elected to a third term so it won't impact him in the next presidential election. If he does not get re-elected the new President looks like the bad guy for raising taxes even though the increases were passed in 2010.

The goal of Obama and the Demacratic Party in place now, is to take further control of other industries (banking, securities, automotive manufacturing) under the guise of turning the economy around. To them free enterprise and capitalism are bad. The majority of our Senators and Congressmen have never run a business or worked long term in a job that has created anything that has added to our countries GNP. They do not comprehend the difference between the private sector where your income is determined by the goods and services you provide and the public sector where your income is determined by how much tax you collect from the people that work for a living to pay the tax they collect.

To quote from Lincoln's Gettysburg Address: "government of the people, by the people, for the people shall not perish from this earth". Based on how this bill came to be, I question whether we still have a government of the people, by the people, for the people. If you feel the same take your opinion to the polls. We live in the greatest country in the world. We need to keep it that way. The best way to do that is to vote for anyone that is not an incumbant.
(Eau Claire, Wisconsin)

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