On Sunday, March 21, 2010, President Barack Obama signed health care reform legislation into law. On June 28, 2012, the Supreme Court upheld most of Obamacare despite challenges to it. Considering that the health care industry comprises 18% of our Gross Domestic Product, this legislation is of vital importance to all small businesses, employers and employees alike.
Small business owners have a lot of questions about how health care reform financially affects their businesses. Here are ten of the top questions (and answers!) asked about the financial effects of health care reform by small business owners.
QUESTION: I own a small business with only 10 employees. I do currently offer health care coverage for my employees. What can I expect from health care reform?
ANSWER: For a business that has 10 employees or less and offers health care insurance, the effect you will feel most is a tax credit if you pay your 10 employees an average wage of $25,000 or less. You will receive a 35% tax credit that will effectively reduce your health insurance premiums by that much. You will receive that tax credit through 2013. After 2013, if you sign up for one of the SHOP health care exchanges, or health insurance pools, you will receive a 50% tax credit each year. The SHOP health insurance exchange will give you insurance rates similar to what you would get in a group health insurance plan now.
QUESTION: I own a small business and my employees are worried how health care reform will affect them because they are satisfied with our insurance plan. What do I tell them to ease their minds?
ANSWER: Tell them not to worry. If you are offering adequate health insurance coverage and have satisfied employees, your company is in fine shape. The only change your employees may see in the cost of their premiums. Premiums are likely to go up in the near future. However, premiums have been going up for some time now and the reasons for this won't necessarily be health care reform, though that may be part of it. The good news is that, effective immediately, the health care reform bill puts in place a process for reviewing increases in premiums and it forces insurance companies to justify them.
QUESTION: My accounting department is wondering how health care reform will impact their work. What should I tell them?
ANSWER: We don't know all the answers to this question yet. One thing we know is that the value of the health care benefits provided to each employee has to be stated on their W-2 at the end of each year starting in 2011.
QUESTION: My company offers prescription drug benefits to our retired employees. How will the health care reform bill affect this benefit and should we make a change?
ANSWER Yes, the health care reform bill will affect this benefit. It is expected that many firms will drop this benefit for their retired employees. The current law allows your company to receive a tax benefit of $1,330 per worker if you allow your retired workers to receive prescription drug benefits. The new law will take this benefit away from your company. This was essentially a tax deduction that your company will lose. It is estimated that many firms will drop the prescription drug benefit for retirees because of the change in the law. The change takes effect in 2013.
QUESTION: I own the franchise of a large chain for a fast food restaurant. Does the health care reform law affect me in any specific way?
ANSWER Yes. If your fast food restaurant is one with more than 20 locations, you must display calorie information next to each food item on your menu. This is also true for vending machines and drive-through menus.
QUESTION: I own a small tanning salon and I've heard that the new health care reform law affects me. Is that true and, if so, how will it affect my business?
ANSWER: Yes, the bill affects your business. There will be a 10% tax on tanning services in the future.
QUESTION: My company currently has 30 employees but I expect it to grow to over 50 employees within the next few years. I don't currently offer health insurance. How will health care reform affect me?
ANSWER: First, you will not benefit from the tax credits offered to small businesses that do offer health care insurance. Only businesses offering health insurance are eligible for this benefit. Second, if your business grows to 50 or more employees by 2014 and you don't put a health insurance plan in place for your employees, you will have to pay a penalty of up to $2,000 per employee, with the first 30 employees exempt from the penalty.
QUESTION: I have employees whose kids could not be insured under my company's insurance plan due to pre-existing conditions. My employees are asking me how health care reform will affect them?ANSWER: Under the new law, effective six months from when the bill was passed, insurers will no longer be able to deny coverage to children with pre-existing conditions.
QUESTION: What about the spouses of my employees with pre-existing conditions?
ANSWER:Beginning in 2014, spouses with pre-existing conditions cannot be denied coverage by health insurance companies.
QUESTION: I have had to offer several long-time employees early retirement in order to get through the recession. This has really increased the cost of my health care benefits for my company. Does health care reform help my company in any way?
ANSWER: Yes. Realizing that many companies have had to offer early retirement to certain employees ages 55-64 in order to survive the recession, a temporary reinsurance program is in the health care bill to help businesses offset the costs of the health benefits of those early retirees. This reinsurance program goes into effect 90 days after passage of the bill and remains in effect until the health care exchanges are up and running in 2014.
Obamacare will probably have little effect on companies that already provide health insurance to their employees unless the coverage they provide is poor. Some businesses, to save money, provide plans known as mini-medical benefit plans. They are typically substandard plans and companies that offer them will probably have to upgrade their coverage.