Healthcare reform is likely driving you crazy. Besides the thousands of pages in the bill, the countless changes and the newly sworn-in Republicans' promise to repeal the whole thing, it's hard to keep track of what is headed your business' way.
"There's a lot of confusion out there and many people just aren't clear on the new changes," says Mark Kellenbeck, a founding principal and COO of Cascade Management, a real estate management services company in Wilsonville, Ore.
A midyear National Small Business Association survey found that 79 percent of small businesses had little or no idea how the new laws would affect them.
Though change may come (again), several provisions of the Affordable Care Act took hold in 2010 and more will roll out this year. For some small-business owners, they feature significant changes in the way employees' healthcare will be provided. But there are possible benefits as well.
Employers will be required to report on each employee's W-2 the value of the health insurance they provide, although the IRS will defer reporting requirements for 2011. The act also calls for new group health plan requirements as well as changes to flexible spending arrangements, including the requirement for a prescription for over-the-counter drugs. And business owners who give clients a nice glow have a special provision: an excise tax on indoor tanning services.
How much the new law bumps into (or benefits) your business will, for the most part, come down to size, says Molly Brogan of the National Small Business Association in Washington, D.C.
Small employers that pay at least half of the cost of single coverage for their employees will gain the Small Business Health Care Tax Credit. "If you are providing health insurance or you start providing it, you can get this helpful tax credit. It's geared toward businesses with low-wage earners that typically have a much more difficult time providing health insurance," Brogan says.
The credit--which can be claimed on Form 8941--is for employers with fewer than 25 full-time employees or 50 part-time employees with an average annual wage below $50,000. The credit is worth as much as 35 percent of a business's premium costs in 2010, and in 2014, it will increase to 50 percent.
The bulk of the reforms related to the legislation will not go into effect until 2014. By then, states will have to set up Small Business Health Options Programs in which small businesses can bond together and buy group-style insurance. The exchanges will be open to businesses with no more than 100 employees. By 2014, companies with more than 50 employees that don't offer qualified coverage to their employees, and that have at least one employee who receives the premium tax credit, will be required to pay fines of $2,000 per full-time employee, excluding the first 30 employees.
The Pulse on Healthcare Reform
Entrepreneurs are happy and frustrated about the legislation. Susie Morrissey, president and CEO of Bell Janitorial in Dallas, says she'll do everything she can to keep her employee count below 50. Much of her competition hires independent contractors who are not subject to the new rules, but Bell Janitorial classifies its workers as employees. To grow the company and maximize profits without pushing her employee count past 50, Morrissey says she'll have to plan the right customer and employee mix. That will likely result in raising prices--or firing some customers.
"When I am at the 50 mark, I will look at my options and whatever is the best for my company is what I'm going to do. If it's better to pay the fine, then that's what I'll do," she says.
Indeed, many small-business owners may very well opt to pay a fine. The $2,000-per-employee penalty sounds like a lot of money but it pales in comparison to the average cost of $5,000 in premiums for an individual or $12,000 for a family--with employers paying as much as half. Many small businesses take pride in providing health insurance for their employees, Brogan says, but some may see the fine as the only affordable solution.
"I think they'd rather put that [fine] toward health insurance, but I think there are going to be a lot of people who just opt to take the penalty," she says.
Cascade's Kellenbeck says the effect on his business will be relatively minor until 2014. His company has approximately 350 employees and already provides healthcare coverage for its full-time workers. With premiums increasing 100 percent during the past seven years, he says healthcare has been Cascade's fastest-rising cost. Kellenbeck believes the legislation will reduce premiums in the long term and predicts just who will be affected.
"It is the businesses that have provided no coverage or limited coverage that felt they couldn't afford it or just chose to operate without it," he says. "They are the ones who are really going to be impacted."