Small Business Challenge: What Does Health Care Reform Require?

   Do you know what the heath care law requires of you, Mr. or Ms. Business owner? Do you know when these provisions and laws take effect? Your responsibilities are about to change, so you want to be on top of the new challenges to running your business. Here are some basic points about the Patient Protection and Affordable Care Act. This information comes from a quiz on the PPACA in the August issue of Employee Benefit Adviser magazine. It is a short take on a long bill, so it is not inclusive.

   Employers with “Cadillac” plans must implement their plans starting in 2018 and are responsible for the excise tax calculations on these plans. Most small businesses do not offer these plans. Cadillac plans are often offered in businesses with unions. Plans that not collectively bargained would not lose their grandfather status if there is a change in third-party administration, but they would lose the status if there is a change in cost-sharing, scope of benefits or insurance carriers. Many companies with the best Cadillac plans have sought, and received, waivers from the federal government to exclude them from the provisions of this law, stating the law is too onerous for them. Good luck trying to obtain an exemption for your business, however.

   Large and small employers will be allowed to offer insurance through state health exchanges, but the states will decide which employers can do so. Employers must offer health coverage for every employee working at least 30 hours per week. Beginning in 2014, employee waiting periods after enrollment can not exceed 90 days. In 2013 employee annual Flexible Spending Accounts (FSAs) will be capped at $2,500. These benefits must be used. If the money is not used it is lost to the employee. Expect to see some confusion about FSAs, Health Savings Accounts, Medical Savings Accounts, other cost-saving plans. Most of the changes in this Act will transpire in 2014, so we have a couple of years to figure out what to do.

   The Small Employer Tax Credit will cover businesses with fewer than 25 full-time employees. It is unclear what that could mean right now. Any business with more than 200 full-time employees is required to automatically enroll all new employees in a health plan. When companies are enrolling their people, they have to provide an “opt-out notice” at the same time. Employees will have the opportunity to decide if they will participate through their employers. If a company has fewer than 100 employees, it can establish a Cafeteria Plan. These plans are allowed under the Internal Revenue Service code, Section 125 plans. These plans can benefit employers and employees by saving on taxes paid while offering a variety of products that can be voluntary. Please see www.IRS.gov for more information on these plans.

   Some requirements of the plan state that chiropractic services need not be included as an essential service. The new rules allow families to choose a pediatrician as a primary care provider and dependent children must be covered until age 26. After January 1, 2014 no one can be excluded from coverage for a pre-existing condition. There is confusion about lifetime limits on the coverage provided. While not germaine to the problems of business owners as a group, your employees will need help to understand the rules. For instance, nonessential benefits have lifetime limits; some limits could violate the Americans with Disabilities Act (disabilities tend not to disappear over a lifetime) and state laws could prohibit certain benefits. Lifetime is a vague term, especially in legal contracts with providers and purchasers. If people start to life well into their nineties, lifetime benefits for all could become a Pandora’s box for the parties involved. The fun is just beginning in trying to decide what this means for you and your employees.

   These are just a few little teasers about what is part of the PPACA and your business responsibility. About 10 days ago the 11^th Circuit Court of Appeals in Atlanta ruled the Act unconstitutional. Conventional Wisdom, aka the pundits, are saying this Act will appear before the United States Supreme Court by next spring at the latest. This will prove to be an interesting fight. Meanwhile, back at the ranch, I will keep providing you with some essentials on the Act to keep you informed. You want good information to make good decisions. Stay tuned.

Have a terrific day,

Patricia

Health Care Reform Impacts on Small Business

   Last week I started writing about the consequences of Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act on small businesses. This week the focus is on a policy analysis report written by John L. Ligon and published by The Heritage Foundation on their website at www.heritage.org. As I wrote previously, beginning in 2014 new taxes will be levied on small businesses. The tax burden on business will be used to help pay for the insurance premiums of employees receiving health care through state sponsored exchanges.

   The Act relegates these taxes to companies with 50-199 employees. But smaller companies will be swept up in the taxation frenzy to meet the increased expenses. As more health insurance companies opt out of offering individual policies in states, more people who purchase their own health care will be forced into the state exchanges, forcing the tax increases.

   In addition to increased taxes, as business owners are forced to pay even higher rates to offset these expenses, they will be less likely to have the money to pay for additional hires, increased wages, and benefits for existing employees, expansion, and other costs incurred in running a business.

   Ligon points out five areas where the reform penalizes small business owners.

1. Higher health care costs. These pertain to businesses that provided group policies. Heritage analysts project in increase for employers and employees for help pay for the exchanges. Many smaller firms will drop their group coverage when it is impossible for them to purchase health insurance for their employees.
2. Ineffective Small Business Tax Credit. Businesses will not be able to absorb the additional costs and the tax credits won’t counteract the increased costs.
3. Higher Regulation Compliance Costs. Businesses are not prepared to meet compliance issues with current staff. Someone has to read and respond to all those new regulations.
4. Medicare Taxes on “Flow-Through” and Investment Income. Medicare taxes will increase, as well as business taxes paid outside of payroll tax. It is coyly termed the Medicare Investment Tax. Business owners will be paying into a fund from the money they earn, increasing their taxes yet again.

   Job creation cannot compete with tax revenues. If you are paying additional taxes for health care premiums and “investments” you won’t be creating new positions that put people to work.

   Please see the original article, complete with references, on the Heritage website. Stay tuned here for more information on Obamacare.

   Have a terrific day!

Patricia

Small Business and Health Care Reform

   First, a word of caution: wait. Wait and see what transpires in health care reform. Whatever I write today will probably change this year, next year, or the year after. The Patient Protection and Affordable Care Act, better known as Obamacare, is being challenged by most states. The latest kerfuffle was initiated by the Thomas More Law Center. It filed suit because the law stipulates that people who choose not to participate can be taxed under the Internal Revenue Code.

   Did you get that? If you do not want to engage in commerce, in this case the purchase of a product of insurance, the government has the power to tax and punish you. Not exactly freedom of choice, is it? The law was upheld in the Sixth Circuit, but one of the dissenting judges in the Sixth Circuit said, “If the exercise of power is allowed and the mandate upheld, it is difficult to see what the limits on Congress's Commerce Clause authority would be.” (Italics mine.)

   Indeed.

   In January 2011 federal judge Roger Vinson quoted President Obama declaring in 2008, “If a mandate was the solution, we can try that to solve homelessness by mandating everybody to buy a house.” Clearly the President uses flexible thinking when it’s his pet project. Nevertheless, 27 states have sued over the Act. At heart lies the right of states to determine for themselves what their citizens can do. Never before has anyone suggested that the federal government can force people to purchase something against their will.

   The egregious behavior only begins there. How would you like to be the enforcer of this twisted law? As a business owner, you would be. Here is the mechanism, as outlined by the Congressional Budget Office, that estimates revenues of $36 billion, yes billion, would be collected in a decade. You would have to deduct the penalty payments from your employees’ paychecks.

   Massachusetts uses a similar program now and the state discovered there are people who are more willing to pay the fine than are willing to be forced to purchase insurance they do not want.

   Those of us who sell insurance and financial services products and tell our potential customers that we will never try to sell them something they neither need nor want will find this impossible to swallow. Those of us who are business owners definitely do not want to become collectors of fines for the feds. No matter how you dice it, this is not what most of us signed on to. If you’re bothered by this, for any reason, make your opinion known. In the mean time, attorneys general in the states are filing suit. Health insurance is one thing; forcing people to engage in purchasing products against their will is something else. Today the issue is insurance. What will tomorrow bring?

Have a terrific day!

Patricia