The following information has been compiled by the National Federation of Independent Business and distributed to its members.
Additional comments have been added to emphasize the effect which the Obama’s healthcare regulations will have on America’s small business.
Senate Bill (H.R. 3590) before Reconciliation Bill changes
The healthcare bill passed by the Senate and House will go into effect over a number of years. In 2010, 2011, 2012, and 2013, most of the bill’s provisions involve new taxes and obligations. For the most part, the healthcare system changes begin in 2014, with some aspects of implementation farther in the future. Below is a timeline of some of the major provisions of this bill.
This timeline reflects only the Senate bill signed into law on March 23, 2010. Now, the Senate is considering a Reconciliation Bill (H.R. 4872) which, if passed, will alter the details of these provisions. NFIB opposes the Reconciliation Bill because in many ways, it takes a bad bill (H.R. 3590) and makes it worse.
2010
· Small business health tax credit: This will do little to nothing to help small firms afford insurance. The credit is very restrictive and puts small business owners through a series of complicated tests to determine the actual amount of the credit. (1) Very few small firms will receive the full credit (only firms with 10 employees or less). For firms with 11-25 employees, the credit is reduced per employee. Firms with more than 25 employees get NO credit. (2) Only firms who pay their workers $25,000 or less are eligible for the full credit. The credit is reduced as the average wage goes up, stopping at $50,000. The credit is only available for a maximum of five years.
· Brand-name drug tax: Manufacturers and importers of brand-name drugs will pay a tax of $2.3 billion. This cost will be passed on to consumers.
· Age 26: Children may stay on their parents’ policies until age 26.
2010 Analysis:
Small business health tax credit:
Really small businesses that don’t pay their employees more than $25,000 are eligible for a 35% tax credit. Consider that it’s not uncommon for a monthly healthcare premium for a family to exceed $1000. Therefore, as an example, the small business owner would have to be willing to annually pay $12,000 (12 x $1000) in premiums and get back from the government $4200 (35% of $12,000) in the form of a tax credit. The tax credit then reduces the total cost of the health insurance to $7800. Understanding that an employee making $25,000 (that’s the limit) costs the employer $1912 in Social Security and Medicare contributions for a total minimum employee cost of $26,912, the $7800 in new healthcare costs would increase the cost of doing business for the employer by 29%. For the employer, the question becomes, “Can the current $25,000 employee be more productive by 29%? And, if so, is there enough business in the pipeline to make this expenditure with a reasonable level of confidence in this economy?” Most small businesses will be answering those questions with a simple ‘No’.
Benefit to small business: Little, if any.
Brand-name drug tax:
Obama made several speeches that proclaimed that the legislation was needed to bend the cost curve in a downward manner. Raising taxes (costs) on one area of the healthcare industry which is so often found to be helpful in lowering costs (artery cleaning drugs generally cost less than artery cleaning surgeries) makes no sense. Small business owners know that this cost is going to get passed along to them (if they offer health insurance) and they will have to pass it along to their customers.
Benefit to small business: None. It is actually harmful.
Age 26:
For college-aged children with medical conditions, this is very helpful. For those without medical issues, health insurance while a person is in their early twenties is very affordable. For the small business owner, the change will lead to higher costs since there will be more people on the policy. However, they are generally healthier and less costly than the typical plan enrollee.
Benefit to small business: Little unless college-aged dependents have medical issues.
Benefit to small business: Little unless college-aged dependents have medical issues.
