Health Care Reform

Small Businesses Would Rather Pay Fines than Obamacare Health Insurance

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ObamacareObamacare, a word that strikes fear into the hearts of many and sparks furious debate among others. Well, ever since the “Affordable Care Act” passed  into law, many small businesses have been very vocal about what types of measures they will take to avoid paying for basic health care coverage for their employees. Some of these measures are drastic, like cutting hours and firing workers.

In addition to that, a lot of companies are even saying that paying the government’s penalty to break the law will actually be cheaper than following it, according to a report by The Wall Street Journal. The Obamacare provision, which goes into effect next year, requires businesses with 50 or more full-time workers to provide health care coverage for employees.

Any business that refuses must incur a $2,000 penalty for each full-time worker above the 30-employee threshold. A full-time employee is any employee who works more than 30 hours a week in a given month. A lot of small businesses cannot afford the new healthcare plan and are only able to afford the penalty.

Owner of Consolidated Management Rick Levi told The Wall Street Journal that the $2,000 penalty is all that he is able to afford. Consolidated Management is a Des Moines-based company that runs cafeterias at schools, offices and jails in 10 states around the country. Levi employs 102 workers and will be required to offer coverage to many under the new law at a cost of more than $500,000 per year, provided every employee takes the new insurance plan. On the flip side, the penalty will only cost him $144,000.

There are a lot of companies that are looking for “alternatives” to the Obamacare plan, some of which are even national chains like Wendy’s and Popeyes. These companies say that even if employees are provided the mandated coverage by employers, they will still be unable to afford the cost of the premium.

Ralph Bower, President of Popeyes, told the Huffington Post in an email that Obamacare is “unaffordable to our team members”. However, some research shows that some people will deem healthcare worth the price and also suggests that companies will be surprised at how many people will enroll despite the fact that it will cut into their paycheck.

Source: Huffington Post – Small Businesses Opt To Pay Obamacare Penalty Instead Of Offering Health Insurance

Small Business Owners Expected to Take Advantage of Health Care Reform

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Health Care ReformHealth policy researchers have conducted new analysis and simulations have determined that only a select few employers will take advantage of certain rules that allow some small businesses to avoid pending health care reform measures. This will render the rules obsolete and will also minimize their impact on health insurance costs.

However, that could very well change should the rules be rewritten to extend the opt-out offer to a wider range of companies, according to the study by nonprofit policy research group RAND Corporation. Experts believe that if you allow more employers to keep their old plans then the government would drive the premiums up that are offered to small employers through health  insurance exchanges. In addition, they could also cut enrollment in those programs.

According to lead author of the study and Senior Economist for RAND Christine Eibner, “We found that keeping the rules as they are written, particularly the limitations on maintaining a grandfathered plan, will be essential to keeping premiums affordable in small business insurance exchanges.”

Starting in 2014, under the Affordable Care Act, laws that govern health insurance plans for owners of small businesses will no longer allow insurers to set premiums based on the gender, health status or claims history of the enrollee.  The goal is to disperse the financial risk of insuring unusually sick or high-cost individuals.

However, a lot of people fear that the plan will be undermined by small business owners with healthy workers who self-insure their firms or maintain grandfathered policies. These options are offered under the Affordable Care Act, which would allow them to bypass the new regulations.

If this starts to happen, then the government-sponsored exchanges would become disproportionately comprised of relatively unhealthy, expensive enrollees. This could very well make the premiums of small business owners extremely unaffordable.

RAND’s analysis, however, shows that small business owners will avoid self-insuring due to significant financial risk involved. Researchers also said that most small business owners won’t meet the required standards to be grandfathered in to existing health plans after 2014.

RAND also said that neither of these alternatives will have any real impact on exchange premiums, should the language in the Affordable Care Act stay the same. However, if regulations were more relaxed to allow more companies to keep their current plans, RAND believes that the cost of premiums offered to small business owners via health insurance exchanges would climb exponentially, possibly cutting enrollment in the plans by 50%.

Source: The Washington Post – Small business owners not expected to opt out of health care reform

So What Does Obama Care Mean for Small Business?

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So What Does Obama Care Mean for Small Business

Be careful little hands what you do!

Congress last night enacted President Obama’s sweeping healthcare plan, but like many things congress didn’t consider all the details. The idea was to assist small business and individual Americans in purchasing healthcare, what it will end up doing is slow and reduce hiring in the future.

The president’s plan is number driven: business from x amount of employees to y amount of employees pay z much toward healthcare, or if they do not, they are fined w amount. This was a fair idea if American company’s personnel strategy was still to hire employees, but frankly, they missed the boat. Instead of hiring marginal employees, companies will either do without the marginal hire or use temps and/or contractors to do the job. Furthermore, with all of the job quota entanglements (and they still are out there), a business owner will have to consider if he or she is going to break a certain healthcare number threshold. Business owners are going to pay very close attention especially if they are near the 50 employee point and this creates a very discomforting scenario.

Suppose a business is at 49 employees and it needs to hire a transportation manager. Looking through the list of employees, there is the transportation secretary who has been a very good employee, but is a secretary. What should the business owner do? Well, the smart thing (but brutal thing) to do is fire/layoff/RIF the secretary and hire the transportation manger; addition by subtraction is going to be rampant! Who will get hurt? The people the president was most trying to help, average hard working Americans! Of course, the secretary might be advised that she can “contract” her old job back with xyz temporary service. What a crock! Of course, xyz temporary service will also have to consider the numbers game, but that leads to some brutal consequences as well. How long can you be a contractor/temp before you are automatically switched out (again to duck the numbers game)?

Also, just how hard is it to start a company as a separate legal entity? A business owner can start an LLC in about 2 days, and a small corporation, like a chapter S, does not take much longer. Remember each of these legal business entities are totally separate “persons.” Therefore the employee counter starts all over again. So too, cost center accounting has been around for years, and each department bills other departments for the work it does. For example, customer service bills sales for processing its orders. How hard would it be to create separate companies, each one under 10 or 25 employees?

Lastly, some companies are just not going to go through the aggravation of the numbers game, and will move some parts of their company off shore. More jobs lost for more Americans, I seem to be recalling which road that it is that’s paved with good intentions…

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Health Care Reform: 3 Things for Small Businesses to Watch

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Health Care Reform

Republicans and Democrats have had their political disagreements and fights in the past but none have been such a death match as the fight over health care reform. With the battle growing each day, some small business owners are beginning to worry that their priorities will got lost in the chaos.

Todd McCracken, president of the National Small Business Association states that “Congress hasn’t approached health care from a small business owner’s standpoint.” Whatever the outcome, there are three important health care issues to keep an eye on come this fall.

1.) Is hiring one extra employee worth your business having to pay tens of thousands of dollars in federal fines? According to the legislation before the House, if your business has a payroll as low as $250,000 then you are required to pay a 2% tax if they did not provide health insurance. This tax would raise to 8% as payroll grew to $400,000. In early drafts of Senate legislation, firms that have 25 or more employees would be required to insure them all or face a penalty per-employee. However the Senate Committee on Health, Education, Labor and Pensions has amended this problem. The bill now excludes a business’ first 25 employees and not only the businesses with 25 employees or less which would have resulted in a $750 fee per worker over. So if you add a 26th man to your work force you will only face one $750 fee instead of 26.

2.) Some people want to see the Government put a limit on the value of tax-deductible insurance. In concordance with the current uncapped system, big businesses are allowed to offer premium insurance tax-free which is a good way for them to recruit and keep employees. If you put a tax on this premium insurance, it may generate the funding required for the health care reform. In addition it may also limit plans which cover unnecessary procedures consequently leveling the playing field for small businesses.

3.) It is no surprise that people who own a small business or are self-employed don’t have the bargaining prowess that the corporate giants do. But, if Congress allows entrepreneurs the ability to form insurance purchasing pools, all that could change. A bipartisan group of lawmakers introduced in 2008 and 2009 SHOP, Small Business Health Options Program, which allowed bills such as this.

We can only sit back and wait for the fall to arrive to see how this health care reform unravels. Needless to say the epic battle between the Republicans and Democrats will rage on until then and no matter the outcome, this will definitely be something to keep tabs on as it affects all Americans.