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Showing posts with label small. Show all posts
Showing posts with label small. Show all posts
Tuesday, July 17, 2012
Tuesday, June 19, 2012
Health reform law: What's at stake for small business
The health reform law is chock full of new rules and benefits for small businesses -- and all are now on the line at the Supreme Court.
The 2010 Affordable Care Act includes everything from a different way to shop for insurance to a tax credit that rewards employers for insuring workers.
The Supreme Court's decision on the law's constitutionality is due out later this month, even as soon as Monday. Generally speaking, there are three main possible outcomes: Health care reform could be upheld entirely or struck down entirely, or the court could do away with only some provisions.
There are so many facets to the law that even partial survival could yield some benefits to entrepreneurs, such as the tax credit. That's why John Arensmeyer, who leads the pro-reform group Small Business Majority, said striking down the whole law would be a nightmare.
"All the benefits will go away," Arensmeyer said. "We'll be thrown right back into the unsustainable system we've had to date."
If the justices elect to keep some parts, while knocking down others, the 906-page law could become even more confusing than it is now. Here's a list of key provisions -- and what could happen to small businesses if they're maintained or discarded.
Health care reform isn't a job killer - yet
Fines: Starting in 2014, the law requires any company with at least 50 full-time employees to provide insurance or pay fines. The size of the penalty depends on a formula in the law.
If one or more workers turns to the government for help buying insurance, the company will be assessed a penalty of at least $40,000, depending on the size of its workforce. If this provision vanishes, there's one less rule for small businesses to worry about.
But the rule affects 200,000 small businesses, a tiny fraction of the nation's approximately six million employers. More than 96% of small businesses fall below the 50-employee threshold.
Individual mandate: This is perhaps the most controversial part of the law before the court. It forces every person to purchase some sort of health insurance by 2014 or pay a penalty.
The mandate counter balances another provision, one that forces insurers to take on people with pre-existing conditions. The idea of the mandate is to force healthy people who otherwise might not get insurance to join the pool of the insured, thus diluting the cost of health care.
If the mandate disappears but the 50-plus employee rule stays, insurance costs could skyrocket for small businesses who will be forced to provide workers with insurance.
Exchanges: Starting in 2014, companies with up to 100 workers will have the option to buy lower cost health insurance through employer-only exchanges set up by the states.
They're called Small Business Health Options Programs, and these exchanges are intended to bring down the cost of health care for small firms. They will make it possible for business owners to compare similar insurance plans -- just as consumers shop for other services. They also could help small firms by allowing them to effectively add their employees to a much larger pool of insurance customers.
The federal law ordered states to create them, and a dozen have already started.
Striking down this provision wouldn't necessarily stop states from creating exchanges. But it would do away with federal grants helping them do so, making the process more difficult for some, impossible for others.
Tax credits: Since 2010, some small businesses have received tax credits rewarding them for providing workers with health insurance. Eligible companies must have no more than 25 workers and pay average salaries of $50,000 or less.
Not everybody hates health reform
Losing the tax credits would mean no more help from the federal government, which averaged $2,700 last year.
But it has turned out to be an underwhelming tax credit. Employers say applying for the credit involves a lengthy, complicated formula that sometimes yields very little financial help. Only 170,300 companies received it last year for tax year 2010, even though the government estimates between 1.4 million and 4 million are eligible.
The 80% rule for insurers: Since 2011, insurance companies have been required to spend at least 80% of every dollar on medical care and not administrative costs -- or refund the difference.
This rule, known as the medical loss ratio, is especially important for small businesses. Administrative costs typically have taken up a much larger chunk of small companies' insurance costs when compared to large companies.
The rule has already been shown to work, at least in California, where 4,400 companies received $3.5 million in refunds from insurance company UnitedHealth this month. UnitedHealth was forced to return the money to comply with the 80% rule.
Eliminating the ratio would drive up insurance costs for many small companies.
Have fears of losing health insurance held you back from quitting your job to launch a business? Email Jose Pagliery and share your story. Click here for the CNNMoney.com comment policy.
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Friday, June 15, 2012
Health reform: What's at stake for small business
There's a lot in store for small business owners in President Obama's health reform law. They should keep a close eye on the upcoming Supreme Court decision.
NEW YORK (CNNMoney) -- The health reform law is chock full of new rules and benefits for small businesses -- and all are now on the line at the Supreme Court.
The 2010 Affordable Care Act includes everything from a different way to shop for insurance to a tax credit that rewards employers for insuring workers.
The Supreme Court's decision on the law's constitutionality is due out later this month, even as soon as Monday. Generally speaking, there are three main possible outcomes: Health care reform could be upheld entirely or struck down entirely, or the court could do away with only some provisions.
There are so many facets to the law that even partial survival could yield some benefits to entrepreneurs, such as the tax credit. That's why John Arensmeyer, who leads the pro-reform group Small Business Majority, said striking down the whole law would be a nightmare.
"All the benefits will go away," Arensmeyer said. "We'll be thrown right back into the unsustainable system we've had to date."
If the justices elect to keep some parts, while knocking down others, the 906-page law could become even more confusing than it is now. Here's a list of key provisions -- and what could happen to small businesses if they're maintained or discarded.
Fines: Starting in 2014, the law requires any company with at least 50 full-time employees to provide insurance or pay fines. The size of the penalty depends on a formula in the law.
If one or more workers turns to the government for help buying insurance, the company will be assessed a penalty of at least $40,000, depending on the size of its workforce. If this provision vanishes, there's one less rule for small businesses to worry about.
But the rule affects 200,000 small businesses, a tiny fraction of the nation's approximately six million employers. More than 96% of small businesses fall below the 50-employee threshold.
Individual mandate: This is perhaps the most controversial part of the law before the court. It forces every person to purchase some sort of health insurance by 2014 or pay a penalty.
The mandate counter balances another provision, one that forces insurers to take on people with pre-existing conditions. The idea of the mandate is to force healthy people who otherwise might not get insurance to join the pool of the insured, thus diluting the cost of health care.
If the mandate disappears but the 50-plus employee rule stays, insurance costs could skyrocket for small businesses who will be forced to provide workers with insurance.
Exchanges: Starting in 2014, companies with up to 100 workers will have the option to buy lower cost health insurance through employer-only exchanges set up by the states.
They're called Small Business Health Options Programs, and these exchanges are intended to bring down the cost of health care for small firms. They will make it possible for business owners to compare similar insurance plans -- just as consumers shop for other services. They also could help small firms by allowing them to effectively add their employees to a much larger pool of insurance customers.
The federal law ordered states to create them, and a dozen have already started.
Striking down this provision wouldn't necessarily stop states from creating exchanges. But it would do away with federal grants helping them do so, making the process more difficult for some, impossible for others.
Tax credits: Since 2010, some small businesses have received tax credits rewarding them for providing workers with health insurance. Eligible companies must have no more than 25 workers and pay average salaries of $50,000 or less.
Losing the tax credits would mean no more help from the federal government, which averaged $2,700 last year.
But it has turned out to be an underwhelming tax credit. Employers say applying for the credit involves a lengthy, complicated formula that sometimes yields very little financial help. Only 170,300 companies received it last year for tax year 2010, even though the government estimates between 1.4 million and 4 million are eligible.
The 80% rule for insurers: Since 2011, insurance companies have been required to spend at least 80% of every dollar on medical care and not administrative costs -- or refund the difference.
This rule, known as the medical loss ratio, is especially important for small businesses. Administrative costs typically have taken up a much larger chunk of small companies' insurance costs when compared to large companies.
The rule has already been shown to work, at least in California, where 4,400 companies received $3.5 million in refunds from insurance company UnitedHealth this month. UnitedHealth was forced to return the money to comply with the 80% rule.
Eliminating the ratio would drive up insurance costs for many small companies.
Have fears of losing health insurance held you back from quitting your job to launch a business? Email Jose Pagliery and share your story. Click here for the CNNMoney.com comment policy. 
Thursday, May 31, 2012
Obama's health care aid to small firms disappoints
WASHINGTON (AP) — Many small businesses struggle to afford health insurance for their workers, but a a new tax credit meant to help them seems to be turning into a disappointment.
Although opinion polls show the credit is one of the most popular ideas in President Barack Obama's health care law, only 170,300 businesses out of a pool of as many as 4 million potentially eligible claimed it in 2010, about 4 percent.
A recent government report found the tax credit time-consuming to apply for and not rewarding enough to be financially attractive.
That's put the Obama administration in the awkward position of asking Congress to help fix the problems by allowing more businesses to qualify and making it simpler to apply. But Republicans who run the House say they want to repeal what they deride as "Obamacare," not fix its flaws.
"They completely missed the target on this thing," Rep. Sam Graves, R-Mo., said of the tax credit. "I don't think expanding it is going to make any difference whatsoever." Graves chairs the House Small Business Committee.
It doesn't help the administration's plea that the biggest small-business lobbying group is a lead plaintiff asking the Supreme Court to overturn the Affordable Care Act. The National Federation of Independent Business isn't likely to spend much time tinkering with the tax credit or promoting it to members.
Small businesses represent the crumbling edge of the nation's system of employer-based health care. Only about 30 percent of companies with fewer than 10 workers offer health coverage, and they often pay more for insurance than large businesses. The credit, which once had support from lawmakers of both parties, was supposed to help businesses already providing coverage afford the premiums. Maybe it would even entice some to start.
"We agree it is not a panacea for all costs," said John Arensmeyer, founder of Small Business Majority, an advocacy group that supports the health care law and disagrees with the much larger independent business federation. The problem is all the negative publicity around the health care law has discouraged business owners from applying for the credit, he says.
"There has been more heat than light shone on this," Arensmeyer said. "There is no reason why small businesses shouldn't be taking advantage of this credit." About 770,000 workers were covered by the businesses claiming the credit in 2010.
The administration says word is finally getting out, and it expects the number of companies claiming the credit for 2011 to more than double, reaching 360,000 businesses.
A recent report by Congress' nonpartisan Government Accountability Office identified several problems with the program.
To begin with, the GAO said, the tax credit is structured so its biggest benefits go to very small companies paying low wages. About 4 out of 5 such businesses don't offer coverage, and the tax credit is not sufficient to encourage them to start doing so.
"Small employers do not likely view the credit as a big enough incentive to begin offering health insurance," the report said.
The average credit claimed in 2010 was about $2,700, although some companies qualified for much more.
Many small firms did not qualify because they paid fairly decent wages. The GAO report quoted an unidentified tax preparer who explained that "people get excited that they're eligible and then they do the calculations and it's like the bottom just falls out of it and it's not really there." It's almost a bait and switch.
Complexity has been another obstacle. IRS Form 8941, which employers must complete to claim the credit, has 25 lines and seven worksheets, the GAO said. Some tax preparers told the agency it took clients from two to eight hours to pull together supporting information and tax professionals another three to five hours to calculate the credit.
Trying to help, the IRS identified "three simple steps" employers needed to follow, but the GAO found "the three steps become 15 calculations, 11 of which are based on seven worksheets, some of which request multiple columns of information."
Arensmeyer said claiming the credit will be simpler once it becomes standard in tax-preparation software.
If the health care law withstands Supreme Court scrutiny, more employers could start claiming the credit. Even so, time is running short. After 2014, the credit is only available for two years. It may just go down as a missed opportunity, for policymakers and small-business owners alike.
___
Online:
The Government Accountability Office's report: http://tinyurl.com/7ae96hn
(This version CORRECTS the final paragraph to delete erroneous 2016 expiry date.)
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