Confusion persists over Health Care Reform


By Hallie Busta

It’s not too late for small business owners filing their 2010 tax returns to take advantage of   new  health insurance  tax credits,   yet many aren’t aware the benefits are in effect, experts said.

The Patient Protection and Affordable Care Act, which was signed into law in March 2010, provides a 35 percent health insurance tax credit to businesses with fewer than 25 employees that pay an average annual wage of less than $50,000. But  many companies and financial advisors still aren’t aware of the credit, said Marcus Newman, vice president at Bannockburn, Ill.-based GCG Financial.

Small business owners wear so many hats, [they] do so much on a daily basis, it hard to find time to educate themselves, Newman said, noting that the legislation can be difficult to understand.

Adding to the confusion is ongoing talk of a repeal to the act among Republican legislators who assert the requirements would prove a hardship for many businesses.    However, according to a Reuters news report,   budget analysts  say rescinding the regulations would  add billions of dollars to the federal deficit, making a repeal unlikely to pass.

Provisions of the Health Care Reform legislation impacting small businesses
Health Care Reform Act Provisions Impacting Small Businesses

Understanding the  Act’s provisions and regulations can be daunting for politicians and small business owners alike.

Tim Sonder, owner of Evanston-based graphic design firm Innovative Design and Graphics (IDG) said that   without a human resources representative at his two-person firm, handling and administering a health care plan can be a difficult task. But it may be necessary to attract quality workers, he says.

It expected as a benefit in the way that this country has structured its health care benefits, he said. And if you don t get them from your employer, it very difficult [for employees] to get health benefits. Sonder has owned IDG for 30 years and had as many as eight employees throughout the 1990s.

He said he is unsure of when the bill different provisions, such as the tax credits and insurance exchanges, will be enacted. Insurance exchanges, which go into effect Jan. 1, 2014, where small businesses and individuals without employer-provided insurance can shop for insurance. In 2014, the small business tax credit for providing health insurance increases to 50 percent.

Are small business owners willing to pay?

To be eligible for the credits, Newman said, business owners must already be providing employees with insurance or be willing to take on the added cost. On average, monthly premiums for a single person on a PPO plan cost  $395, GCG said. The average cost of family coverage, including the employee, spouse and any number of children, is $1,095 per month,  GCG said. Employers providing health insurance typically cover between 25 percent and 100 percent of the premium, with employees paying the rest, he said.

But some small business owners simply can’t afford to provide health insurance for their employees, especially in the current economic climate, said Beth Doria, executive director at the Chicago-based Federation of Women Contractors.

Mary Goers, owner of the Chicago-based Corporate Graphics of America Inc., provides insurance for her 10 employees, but foresees increased costs due to the legislation and is concerned that she won t be able to stay in business as a result.

I don t know what our options are going to be, she said. I m looking for this new House to pass something that is a little more amenable to business.

Keeping headcounts below 50

Some small business owners are purposely holding their employee count to below the 50-worker level that would require them to provide insurance for workers, Doria said. Companies with 50 or more employees that fail to provide insurance by 2014 can be assessed a per employee penalty, according to the Act.

That one of the unintended consequence of a bill like this, Doria said. I think true reform comes with having to wrestle with the true cost of medical benefits and procedures.

A study released Tuesday by the Sausalito, Calif.-based Small Business Majority found that of the 619 small business owners polled nationwide, 67 percent weren t familiar with the insurance exchanges and 56 percent weren t familiar with the tax credit. The survey took place from Nov. 17 to Nov. 22, 2010 and asked small business owners whether the tax credit and insurance exchanges will make them more likely to provide insurance for their employees.

Is providing insurance worth the extra cost?

Another  study, released this past September by the New York City-based Commonwealth Fund, found that up to 16.6 million workers are in firms eligible for the tax credit available between 2010 and 2013.   The tax credit could provide an estimated $40 billion in federal support to small businesses over the next 10 years, the study said.

Providing insurance for employees generally comes at a significant cost to small business owners, the Commonwealth study said. On average, small firms pay up to 18 percent more in premiums than large firms do for the same health insurance policy, it reported.

That something Sonder said he had to deal with before the health care bill passed. With very small groups, it can be very hard to get insurance, he said. “If an employee does not meet the insurance company standards, it may be difficult to secure a competitive rate for the group. Sonder said he has yet to look into a new plan since the bill went into effect but hopes the new legislation will make it easier for small business owners to find competitive insurance rates for their employees.

Less than half of firms with fewer than 10 workers reported offering health benefits, according to the Commonwealth study, compared with 98 percent of firms with 200 or more employees that said they do.

Ultimately, the ability of small firms to offer high-value health benefits to their workers will reduce the considerable disadvantage that small businesses have had in the labor market, allowing them to compete with larger businesses for high-quality workers, the Commonwealth study reported.

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