As the original 2700 pages of Obama’s new health plan gets digested, business owners are beginning to get just a glimpse of what the next several thousand pages will say.

The “How the new healthcare reform Will Affect Your Business & Employee Benefits” seminar, put on by The Henahan Company, highlighted many  of the current issues, but also pointed to what the bureaucrats will be adding before the bill is implemented. Emily Murry, spoke to this issue at the seminar.  Murry sits on the Republican Study Committee and watched the entire process unfold during the process, and is a legislative assistant to Representative Tom Price of Georgia.  “We expect many more thousands of pages when they are done, the bill contains the bones, but many more rules need to be written, and mistakes corrected before we can accurately calculate the costs to small business”, says Murry.

Many details remain undetermined. For instance one element says that small employers (2 to 9 FTE employees) with an average salary under $25,000 will be eligible for a 35% tax credit. This sounds favorable, except the FTE, or Full Time Equivalent employee rules are not yet determined.  So as of now, it is unknown exactly what the provision means.  If the credit is in the form of a “tax credit”, then the business will have to be profitable in order to take advantage of the credit at all. If the employer pays less than 50% of the premium, they are not eligible.  So to get a tax credit, some employers must increase their contribution to get the 35% credit, potentially eroding it. The effect will be to increase the overall costs to the employer.

Changing the plan, at all, will cause the employee to be put into the “pool” so only existing plans can quality. So hopefully your plan needs no alteration!

In addition the premium counted toward the credit may not exceed an “average premium” as set by the Health and Human Services agency. Lots of hoops will need jumping to keep all employees on existing plans and receive any of the promised small business credit. 

 Additional bookwork will be required by  small businesses. The only way the IRS will be able to comply with the oversight requirements is to know exactly how much every business is spending on each employee for health care.  So businesses will have to calculate and report on a W-2 to IRS what those numbers are.  Many business people are already over burdened with government reporting and compliance issues, this will add significantly to that burden.

To add to the small business sting, new penalties will create an “incentive’ for small businesses to report and comply with the series of new regulations, and as noted above, many are not even written yet.

New taxes are also woven throughout the bill. Small business owners will be hit with increased Medicare taxes. More successful business owners will have a 62% increase on MediCare Hospital taxes, while being cut back to a maximum $2500 medical contribution to their FSA programs.

Another 3.8% tax applies to all people who make over $250,000, a nice sum for an employee but not so much for small businesses who generally file tax returns as a proprietorship or under Sub Chapter S corporations that treat them as individuals. These small business people must finance growth in accounts receivables, loan pay downs and machinery purchases with their after tax income.  The only place capital is created in a small business reporting individually or in a Sub Chapter S Corp. is when personal profits are made. When this is taxed the same as a W-2 employee, the effect is to keep cash out of the company, and prevent business loans from being paid faster.

Separately Bill Gates recently said that the bill was about extending coverage to more Americans, but that the new healthcare law, “will not decrease medical costs.” Of course Bill is not a professional health insurance expert, yet on this issue the industry and Bill Gates agree.

The Henehan Company is sponsoring a continuing series of New Healthcare Update Seminars with the goal of providing accurate information to businesses about the significant impact on them and their employees as the new rules are written, so employers can make intelligent decisions about healthcare mandates.

As the business owners filed out of the seminar, one person was heard to say, ”It’s horrible - there are no words to describe how bad it is.”  It looks like a tough sell to small business as the reality becomes clearer.

You can see information about the upcoming seminars or use the Henehan New Healthcare Resource Page at http://www.henehan.com/resources_healthcare.htm .

InlandEmpire.US Staff