What you need to know about the Health Care reform…and how it will affect your business
The digest: Many small businesses have a hard time affording health insurance for their employees. It is expensive. The new reform attempts to lower these costs through state-run insurance exchanges…where small businesses pool together to purchase coverage. Between now and 2014 when the exchanges will be in place, there will be tax incentives for small businesses to start offering coverage. It’s only play or pay for bigger businesses. By 2014, businesses with more than 50 employees will be forced to offer insurance or pay a fine.
Only time will tell what the impact is to small business. With the credits and exchanges we can expect more small businesses to offer health insurance, but how many will depend on the depth of the savings from the exchanges. We can also expect sole proprietors to have an easier time getting health insurance, which could indirectly encourage more entrepreneurship. And for our larger small businesses (those with 50+ employees) the fear is that there will be an adverse impact on hiring given incentives to stay below 5o employees and 80k salaries.
Current state: The smallest businesses aren’t providing their employees with health insurance
Lots of small businesses aren’t offering health insurance…
Only 49 percent of firms with 3 to 9 workers offered any type of health insurance to their employees in 2008. In contrast, 99 percent of firms with more than 200 workers offered health insurance.
Those that do offer insurance are paying more…
Small businesses (less than 100 employees) pay up to 18 percent more per worker than large firms for the same health insurance policy.
And things aren’t looking up.
Between 2002 to 2008, businesses with 3 to 9 employees offering health insurance to their workers declined from 58 to 49 percent.
The reform’s intent is to lower costs for the smallest businesses with credits and exchanges and make insurance mandatory for bigger businesses
How small businesses will buy insurance:
- By no later than 2014, states will have to set up Small Business Health Options Programs, or “SHOP Exchanges.”
- A SHOP exchange will pool small businesses (less than 100 employees) together to buy insurance.
- The impact? These are expected to have a small positive effect (between 1-4%) on the premium cost and amount of coverage offered.
Starting now until 2014, businesses with less than 25 employees will get a tax credit.
- If you have 10 or less employees that you are paying less than $25K a year, you will be eligible for a tax credit of 35% of health insurance costs
- If you have between 11 and 25 workers with an average wage up to $50K, you are eligible for partial credits.
- You don’t get a tax credit if you have more than 25 employees.
- Any employee who earns more than $80K/year will be excluded from the credit
- In 2014, if you have 10 or less employees, earning less than $25K, you could earn a 50% credit.
It is pay or play…for bigger businesses
- By 2014 if you have more than 50 employees, you will have to either offer insurance or pay $750 per employee.
- This coverage will have to meet minimum benefits and services, as well as handle 60% of costs.
- In 2011, employers will have to provide coverage for dependents of employees until the age of 26. (Now it is typically age 19 or the end of college)
If you are a freelancer/one person shop, coverage expansion will help you:
- By 2014 insurers won’t be able to set rates to exclude coverage based on pre-existing conditions, and can vary premiums only by geographic location, age, and tobacco use.
- Going into effect right now is a ban on lifetime limits on coverage, and on “rescission” (canceling policies already issued) except in cases of fraud.
Other stuff small businesses need to know:
- Part-time employees will be counted toward the 50-employee minimum (pro-rated)
- You will have to report the value of an employee’s health care plan on W-2 forms
- If you earn (as an individual) more than $200,000 a year, or are a couple earning $250,000 or more, there will be a 3.8% surcharge on investment income to help pay for the bill
- This SHOP exchange will handle individuals as well. The Congressional Budget Office (CBO) expects the number of people getting insurance through the new marketplace to start around 8 million in 2014 and to grow to 24 million in 2019.
Questions? Have a point of view on this? Please leave it in the comments.
March 29, 2010 at 1:51 pm
So what is considered a company? I have a corporation with two DBA’s. One with 45 employees and the other has 10. Am I under the 50 limit?
Thanks,
March 30, 2010 at 8:55 am
Good question. I have searched some analysts reports and have not found your answer. For small business owners, just about everything in the new legislation is based on the size of the business. Since setting up a DBA is so easy, one could imagine the government wouldn’t be too keen on using that as a potential workaround for businesses to avoid the employee limit.
A DBA allows a single legal entity (corporation, LLC, etc.) to operate multiple businesses without creating a new legal entity for each business…thus the question is if health care is based on the legal entity or business name. Again, my guess is that they base it off the legal entity.
Any experts out there care to comment?
March 30, 2010 at 6:45 am
Quickbooks… can you just report the facts. We don’t need the biased Whitehouse version of Obamacare
March 30, 2010 at 8:41 am
Hey Troy – Sorry if you feel we were biased. The intent is to report the facts on health care reform, as it pertains to small businesses. Please let me know if any of the facts are wrong here or mis-represented.
March 31, 2010 at 9:14 am
That was not biased at all.
March 31, 2010 at 11:41 pm
I felt that it was a good report, short and to the point. I get lost trying to read throught all the gov. law crap. all I can say is good report and it was not biased at all.
April 9, 2010 at 8:29 pm
You did give the facts but you act like this is good for small business. As a small business owner, any credits we receive are paid for by hard working americans like ourselves. My income tax rate will increase to pay for this mess. I don’t want credits or anything from the govt. We need to remember that the govt. is us, all of us who pay taxes; which by the way is only 50% of this country. The 50% who don’t pay taxes voted for the socialists running this country. I grieve for my grandbabies who will be paying for this mess. This bill is insurance reform, not health care reform. Only when we address the real issues will we have cost reduction on our health care. Only then will our premiums be reduced.
April 5, 2010 at 4:29 pm
There is no change, the biz that can afford it will pay it. The biz that can/t pay it won’t. It has always been that way. Now quality may go down for those who rely on the system, but that is what money is for, your health if you have it. Otherwise you are in the hands of others just like before.
Now that we get it lets get these guys out and get this economy back in our hands and lets make sure that the backbone of America doesn’t become the welfare office, speaking for my kids.
April 5, 2010 at 5:39 pm
Sal, you make a good point of pointing out that systems change and businesses either adapt or don’t, but you’re kidding about being in control of the economy in the previous administration, right? You really think that they had your best interests at heart and that a different one will as well? The economy was never in your hands and it never will be unless you’re Bill Gates-class wealthy and influential under the present “free market” system.
I find it very interesting that some of you on here seem to be reflexively complaining about the changes, not with facts, but with “it’s not MY idea so it’s a bad one”.
Perhaps it will help to think of HIR as a set of consumer protection laws. I can guarantee you that insurance companies are hard at work finding loopholes so that they can continue to NOT provide the care they are contracted to, so quit thinking of this as a “takeover of health care” (which it is not) and think of it as ways to get what you actually pay for. I can’t imagine a single small business owner who would object to that.
March 30, 2010 at 7:26 am
Obama has created an atmosphere of anti-business / anti-success for the individual. I don’t work my 100 hours a week to “spread my wealth”. This guy is a disaster for this country.
April 1, 2010 at 7:56 am
Eric,
I know the 100 hour weeks. I understand the frustration, but as Tom has said, spread the word and get the vote out to oust the sonsab…….s. I am 58 yo and canot believe the folks my age that fekll for the fool in the big white house! It distresses me! the report by intuit team is informative to me!
March 30, 2010 at 8:09 am
Eric – Welcome to the new world order! You work 100 hours a week so that Obama’s voting base can receive free benefits for doing nothing. Disaster, indeed. The November elections cannot get here fast enough. It’s the only way to effectively thwart his legislative agenda.
March 30, 2010 at 9:06 am
Thanks for the concise summary of the major effects of the healthcare act. It will help us start to prepare for the changes ahead.
March 30, 2010 at 10:17 am
Will non-profit tax exempt orgnizations suchas as churches be forced into providing health insuruance for their employees?
March 30, 2010 at 11:36 am
i can’t understand why everythig has to be political.
March 31, 2010 at 9:10 am
It’s not specifically political, merely a quest for the power to bend the culture to one’s desires. Pure demogogaury mixed with a pinch of sophist idealsim fomented in the ivory towers called our government-run schools. The culture will cycle back to self-reliance, it must, for else it will collapse under its own weight.
March 31, 2010 at 9:15 am
In short, you just don’t want to do anything for the sick kid who can’t be covered with health care.
March 31, 2010 at 10:32 am
Wow, How stupid is the statement that we don’t want to do anything for sick kids. Are you a complete moron. With this plan we will cover that poor sick kid and then kill his future with a mountain of taxes he will have to sustain in his work years to fund this monster. The government seems to think that if they tax business and those rich entrepreneurs we will bare the burden of those taxes. Not so, we will just raise the costs of the good and services that we provide so to pass the cost on to the consumers. So, if you want real change you would support a consumption driven tax such as the fair tax. This would still put the burden on the consumer but everyone would pay their fair share. IE, Drug lords gun runners, the so-called rich, work class heroes and so forth. This would abolish the IRS and give the government all the money they need to have nationalized health care. Which, I am in favor of. What I am not in favor of is enslaving our children and grandchildren with a unsustainable burden of taxes. There are plenty of ways to handle this with out killing creativity and innovation.
March 31, 2010 at 2:38 pm
I love to help those that need help. That is part of our wonderful social contract. America is populated with individuals with this strong desire. I confess, I have no desire to help the able-bodied unwilling to contribute.
April 6, 2010 at 8:08 am
when politics, and government starts to control everything then everthing then becomes political
March 30, 2010 at 11:53 am
What happens when an employee has a regular full time job and an additional part time job at a different company? Does the part time employer still take a hit on that particualr part time employee?
March 30, 2010 at 12:49 pm
I have 4 employee’s and 2 principle owners in the business. If I opt for employee health insurance can the 2 principle owners be included. If they can be included would that be a good or bad plan?
March 30, 2010 at 12:50 pm
I forgot to mention that it is an LCC
March 30, 2010 at 12:53 pm
This mentions small business with fewer than 10 employees who make less than $25k, and larger businesses with 11-25 employees, but what about small business with fewer than 100 employees but who make more than $25k?
March 30, 2010 at 4:24 pm
I am also curious about the small businesses with less then 10 employees but pay those employees a livable wage. I own a small firm with 4 employees making between 30k and 60k. Will I be eligible for the full tax credit?
March 31, 2010 at 7:28 am
no soup for you as the law is written.
worse yet, you have to make soup for others.
March 30, 2010 at 1:13 pm
We currently offer an HSA type of insurance. I don’t see how any required policy will be anywhere close to our premium we pay now. Does we know yet what the requirement policy minimums will be for an ObamaCare policy?
March 31, 2010 at 7:26 am
it will likely be outlawed as non-compliant since it does not meet “minimum standards” of coverage.
hsa are going the way of the dinosaur in spite of the fact it actually does lower expenses since beneficiaries “feel the pain” of their decisions to consume.
April 8, 2010 at 9:21 am
I would hate to see HSA’s ousted. It has been the one healthcare reform that has actually encouraged the consumers to be accountable for how their healthcare dollars are spent. That is the type of reform needed. Forcing health insurance upon employers will only decrease the incentive for business growth and accomplishment.
March 30, 2010 at 2:11 pm
Apologies; I meant fewer than *10* employees in the above question.
March 30, 2010 at 10:33 pm
Hey all – I’ll be looking into everyone questions and see how much info is out there right now. To be fair, the policies are slightly undefined for that click down level right now…and likely to be challenged or changed before the 2014 date. Will let you know what some experts say and get back to everyone.
March 31, 2010 at 7:24 am
sounds awesome. the more successful you are — the more you have to subsidize other. the less successful you are — the more you get. old joke that progressive liberals like to ignore businesses when they are growing, regulate and tax when they are successful and subsidize when they are failing.
welcome to the bowels of socialis, — the implementation into law of “thou shall absolutely covet thy neighbors property and use 50+1 democracy to steal from them.”
April 2, 2010 at 7:33 am
Robert, seriously, the way you go on leaves one with the notion that there are no millionaires in places like the UK France Sweden Canada or Germany – all places with better health care than ours. I operate a biz with 11 employees and have provided health insurance for a number of years and I have seen my premiums go up by 30% annually, this before Obama. Stop complaining and get to work.
April 2, 2010 at 7:58 am
The only thing about Canada and all them is that the quality of that health care is not as good as here. Look at statistics. I was all for it until I really looked into it. Less recovery rates and such.
April 5, 2010 at 11:24 am
I own a healht care company. What pray tell qualifies you tell me about this legislation and its merits?
Foreign health care system are subsidized by R&D done expressly for the US consumer. No one develops a drug or a stent or anything for the French, they do it for the US Consumer. Why b/c we pay for the advancement.
So next time you talk sheer stupidity about foreign health care systems that suck for the SICK (great for the healthy), better t=you take an ECO 101 class.
April 9, 2010 at 9:51 am
I’ve lived in some of those countries and consumed their health care services, but that is besides the point- I come to this site to get information on accounting systems and practices not a political lecture from people with an axe to grind. You and others like you who use this forum as apolitical soapbox have made it impossible to get the info I came here to get and by the number of posts by you I wonder how many billable hours you waste complaining about things that have not happened yet. Again I’m here to work I would appreciate it if you would get out of my way.
March 31, 2010 at 7:27 am
Okay, we have insurance through my husbands work. We have a 23 yr old daughter who can’t afford coverage. The new bill says we can cover her until she is 26. When can we add her back onto my husbands policy?
March 31, 2010 at 7:31 am
Probably as soon as you pay the extra premium.
March 31, 2010 at 7:30 am
So I must offer health care to all employees regardless of employment status (full or part-time)???????
a new kernel of crap ….. gets worse by the minute.
March 31, 2010 at 7:31 am
“Thou shall not cover thy neighbors property (or health care).”
March 31, 2010 at 7:32 am
Covet, sorry.
March 31, 2010 at 7:35 am
so does this mean the health care saving account i’ve been using the past 14 years instead of lining the pockets of insurance company execs. will no longer be allowed? i’m now being forced to pay thousands each year to an insurance company and if i don’t go to the doctor all year, then thousands of my hard earned dollars are lost? with an insurance savings account, i KEEP my money each year and its there when i need it.
April 5, 2010 at 11:35 am
Basically, your HSA will be eliminated over time as “mandates” are piled high and deep onto the “Officially Sponsored Uncle Same” policy.
At said point, HSA is not needed. You probably take the money out, pay 75% marginal tax rate and live happily on MEDICAID.
All this is — is Medicaid for everyone. We are all the same so far as “health care goes.” Same garbage that is..
March 31, 2010 at 8:29 am
I own a company, and all my employees and 1099. Does this rule apply to independent contractors as it does with W-2 employees?
April 2, 2010 at 10:28 am
Paul,
1099 employee’s are self-employed. So this would not apply for them.
April 5, 2010 at 11:26 am
The IRS will tighten up on this soon enuff.
The Democratic Socialist Party will leave no loop holes.
March 31, 2010 at 8:54 am
This sounds like a disaster to me… How’s that hope and change working for you?
April 2, 2010 at 7:35 am
It’s working great for me. I’m glad this bill passed and you will be too when it succeeds.
April 5, 2010 at 11:27 am
If by “great you mean I can dump 20 employees in Medicaid and pay a $250 fine. Yup, sure is great.
April 1, 2010 at 12:02 pm
I appreciated reading the QBs synopsis on health care reform. I stopped reading all the comments about 1/4 of the way down the page. Are sharing your personal political views really necessary in this forum? Why don’t we just see how it all actually shakes down before bitching about it? Are you going to eat your words if healthcare reform actually turns out to be a good thing? Probably not.
April 1, 2010 at 3:12 pm
Heather, you just beat me to it. I need specific information on how HIR is going to affect the company; if I want political commentary, I will go elsewhere.
Moderator, is there a way to control these comments? If not, this blog is a complete waste of everyone’s time. I’m sure it seemed like a good idea when it started, but this is not the place for the negative commentary.
April 1, 2010 at 4:05 pm
Thanks Susan for your input. We try not to moderate comments strongly here. Some of the good and bad value of a blog is hearing all the points of view. Hopefully you were able to glean some value from the summary though!
April 1, 2010 at 8:44 pm
Heather and Susan: I think that the political commentary is very much necessary. I do agree that name calling and claims without supporting details will alienate some people and cause them to not become informed of the truth though. I feel that it is because of a lack of political commentary, that our nation is now on the brink of financial ruin. Had more Americans been informed about the abuses of our government, we wouldn’t be in this situation in the first place. Any bill, with a multi-hundred billion dollar cost, that is passed by one party alone, is very much in need of political commentary. National healthcare is a political topic. History shows that socialism does not work. However, most Americans are not aware of this…or there would be much more of an uproar than there is.
April 2, 2010 at 8:24 am
Sonny, while agree that political commentary and debate is vital to a democracy, that’s not what this blog proports to be about. The title is, “What you need to know about the Health Care reform and how it will affect your business.” That’s what I’m looking for – information. I am very politically active and can get that sort of debate and commentary in other places. What I’m looking for – and what this blog advertises itself to be – is a place for *information*. Since it is turning into a bash-HIR blog with only opinions, no real information, apparently it is not the place I need to be. It’s not as if this is the only blog that indulges in that type of commentary.
April 2, 2010 at 10:25 am
Sonny,
I’m not sure that you noticed but the battle is over. Health Care Reform won and what the wonderful people of Quickbooks are trying to do is let the small business owners know how it affects them. If you don’t like what is happening in this country vote about it, or move to another country, but please stop wasting our valuable time with your criticism.
April 1, 2010 at 5:59 pm
I’m more interested in how this will affect me as a sole proprietor who has to get his health insurance from State funded income support divisions, or by buying it from expensive third parties. I want to know if I’m going to have coverage now, despite being a lowly single ownership business.
April 4, 2010 at 4:42 pm
Here’s one entrepreneur’s response to the anemic economy and government requirements. I’ve had to slash my employee count. I’ve outsourced my information processing to India at $8.50 an hour. Moving forward, I plan to create loose affiliations with 1099 workers.
April 4, 2010 at 8:22 pm
Hey all – Found some resources that will help you understand the impact to your unique business. Bottom line is that changes won’t be coming right away for any small business (under 50 employees) and insurance won’t be required for these smaller businesses. That said – there are a lot of details to understand so your business can be aware and prepared.
Below are helpful links and resources to learn more.
Kaiser Family Foundation (www.kff.org)
Employee Benefits Research Institute (www.ebri.org)
http://www.nytimes.com/interactive/2010/03/21/us/health-care-reform.html
For small business specifically: http://www.nytimes.com/interactive/2010/03/19/us/politics/20100319-health-care-reconciliation.html#tab=5
Link at the bottom for small businesses:
http://www.whitehouse.gov/blog/2010/04/01/what-health-reform-means-you-and-your-community
April 5, 2010 at 11:31 am
It is all California sunshine to the acolytes and sycophants.
Increase Demand, Decrease Price, Shrink Supply, Tax the Crap to Get it Done.
Best part will come when the Feds start calling MDs greedy for not wanting to service 50-70MM more Medicaid patients and make it “mandatory” to see them at whatever price the Gov.t says. (Already in the works kids)
Eco 101 for this group of folks.
April 7, 2010 at 10:33 am
I am unhappy with QB for being involved in promoting Obamacare. Whatever your your opinion this is not the forum to express it. QB should spend its time improving its program not trying to change hearts and minds
April 7, 2010 at 11:03 am
Hey Michael – again want to remind readers that QuickBooks Online is passionate about helping small businesses set themselves up for success. Part of that that is helping you stay on top of the current reforms and laws that may affect you. Michael, apologies if you took the post to be something more.
April 8, 2010 at 11:26 am
In what year will we need to begin reporting the value of the employee’s health care plan on W-2 forms? Are we reporting the employer’s portion, employee’s portion or both?
April 8, 2010 at 12:28 pm
Hopefully this will get defunded and/or repealed and we won’t have to deal with any of it.
A much simplier syster would do the it.
April 9, 2010 at 7:22 am
You forgot to remind small business owners that there are 18 states challenging the constitutionality of the Obama health law.
If the Roberts court decides the new law is a radical shift of authority from the states to the federal government and rules against Obama’s interference in states rights, the entire discussion is moot.
April 9, 2010 at 11:37 am
Good point Thomas. Let’s hope when this reaches the Supreme Court they will follow the constitution and rule against
this intrusion. Then maybe a truly bipartisan bill can be passed when we have a new President.