Bites and Benefits of the Health-Care Bill

There's a lot of buzz around the new health-care reform bill and how it will affect business owners. At its signing, President Barack Obama said the new health-care law would benefit small businesses and that health insurance exchanges created by the law will become "a competitive marketplace where uninsured people and small businesses will finally be able to purchase affordable, quality insurance." Although the president's intent is noble, we all have the same question--what will the actual effect be? If you're like me, you've already scoured the internet looking for the answer to this question. Here's what I found out.

• Non-coverage penalty. I don't like penalties. Unfortunately, the new bill imposes new penalties on business owners, and they will be enforced by the IRS. The bill requires small-business employers with more than 50 full-time employees to offer health insurance coverage to all full-time employees. Under the bill, you're considered a full-time employee if you work 30 hours per week, on average. Small businesses must offer full-time employees health-care coverage by 2014 or pay a $2,000 penalty per employee. Yes, you read that right, this penalty is per employee. But before you get too startled, here's the good news: According to the White House Council of Economic Advisers, 96 percent of businesses already offer health insurance. However, the "forced" coverage offered must meet minimum benefits requirements--covering both a specific set of services and 60 percent of employee health costs overall.
  
  The name of the game is "affordability"; thus, it is not just a matter of offering your employees health coverage, but affordable health coverage. If your business offers what is deemed unaffordable health-care coverage under the new law, your business can be assessed a $3,000 penalty for each employee forced to take a subsidy because he or she can't afford your company's health care. And there is still some uncertainty under the law. For example, it's unclear how or if the Treasury Department and IRS will alter their approach when it comes to salaried workers and company owners. We'll have to wait and see.
   
• Tax credit. Under the new law, the immediate tax credit the president promised is for small businesses with fewer than 25 employees. Those employees' average annual wage must be $50,000 or less, and the company must already be contributing at least 50 percent of total premium costs for its employees' health insurance. This tax credit offsets a business's health insurance premiums and operates on a sliding scale, with a full credit being 35 percent of employees' premiums for businesses with 10 or fewer employees and average annual wages of less than $25,000.
  
  What you need to know is that this credit phases out as the payroll, excluding seasonal workers, grows to 25 and wages rise to $50,000. This credit is not refundable--but it can be carried back for one year or forward for up to 20.
  
  In deciding how your business will be affected, please remember that for purposes of this law, Congress has redefined the meaning of "small business" and "full-time worker." Many businesses are worried about accurately calculating where their particular business parameters fall for the purpose of this law. To help out, the Small Business Majority has installed a tax credit calculator on its website to help businesses figure out the credit based on their business parameters.
   
• Reimbursements. Here's another great benefit for businesses: Within 90 days of the law's enactment, a "temporary reinsurance program" will be initiated to help companies provide health benefits for early retirees. Businesses that cover retirees ages 55 to 64 who are not yet eligible for Medicare will be reimbursed for 80 percent of their claims from $15,000 to $90,000. We all know how expensive this type of coverage can be, so I love that this reimbursement begins immediately, will offset the expensive cost of coverage and will continue until at least 2014, with the possibility of further extension.
   
• SHOP Exchanges. The year 2014 promises to bring more assistance to small businesses struggling to comply with health-care reform. By then states should have set up Small Business Health Options Programs, or "SHOP exchanges," where small businesses can create a pool to buy insurance. Congress extends the love to large companies (those with 101 or more employees), too. Beginning in 2017, states are allowed to permit large companies to participate in SHOP exchanges. The SHOP exchanges hold promise for bringing small businesses' premiums in line with those of large companies through greater purchasing power. The Congressional Budget Office has estimated that the exchanges would ease small business insurance costs. Premiums in the small-group market are forecast to fall between 1 percent and 4 percent under the exchanges, while the amount of coverage would rise by up to 3 percent.
   
• Exemption for small, closely held businesses. We all know that the new law is expected to be paid for, in part, by a payroll tax increase on individuals earning more than $200,000, families earning more than $250,000 and tax penalties for non-compliance. However the law graciously and explicitly exempts people running small, closely held businesses from the tax increase.

The bottom line is simply that Congress left many of the particulars of the nearly 2,700-page bill unspecified. Our theories and assumptions about how this bill will actually affect us may have to wait for the regulations--or politics in late 2010 and beyond--to play out.