How will Healthcare Reform Impact Small Businesses?


12

So it looks inevitable now…the healthcare bill will probably be passed tonight. Without getting into the politics of it, how will this impact small businesses? How will this impact your company? Or will it not have any impact at all?

My opinion is that it will increase small business taxes and as a result hurt small businesses and job creation. Am I looking at this in the wrong way? What are your thoughts on how this will affect those of us setting out to start a new business?

Also, can someone living in a country that has universal healthcare comment on how its implementation has helped or hurt small businesses?

And please lets keep this discussion focused strictly on the impact to small businesses. The other aspects of the bill should be discussed elsewhere.

UPDATE: As I expected, the bill did pass last night.

Health Insurance Jobs USA Government

asked Mar 22 '10 at 12:36
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Zuly Gonzalez
9,194 points
  • I assume you are talking about Healthcare Reform in some concrete country - USA? – Ross 9 years ago
  • Calling this legislation 'health care reform' is a misnomer. While we certainly could benefit from some reforms in our health care system, this is actually a long planned move to dramatically increase the role of the federal government in our everyday lives. This is ALWAYS bad for small business. – Keith De Long 9 years ago
  • I agree with what you said, but what else should I have called it? – Zuly Gonzalez 9 years ago
  • Zuly, my apologies. I didn't intend the comment to criticize you. This is what the sponsors are calling it so it's natural to use their language. I prefer Al Sharpton's description, 'socialized health care'. Sharpton said this is step one of change to socialism in America – Keith De Long 9 years ago
  • Zuly, as a group, entrepreneurs lean to the mid-Right of the US political spectrum, so your answers will be absent facts and biased by political team colors. For example, while the Right fears the growth of government in our lives in health, they don't in defense/policing. Maybe our defenses should also be "free market" and "privatized"? :) Tread carefully! – Alphadogg 8 years ago
  • @alphadogg: You stated, "...entrepreneurs lean to the mid-Right of the US political spectrum, so your answers will be absent facts...". Are you actually suggesting that those on the right ignore facts, while those on the left don't? If so, that is a ridiculous statement. And if you tally up the answers, the overwhelming majority are FOR the bill, which goes against your assertion. – Zuly Gonzalez 8 years ago
  • @Zuly: No. I can see the misunderstanding. I'm stating (trying to?) that a biased group will give a biased answer. I didn't say anything about the accuracy of the answer. Furthermore, a topic like "Universal Healthcare" will likely generate more heated responses than a more banal topic. I saw only two topics that addressed the issue accurately for SMBs without digression. – Alphadogg 8 years ago
  • @Zuly: For example, for every statement pro or con, replace "healthcare" with "defense" and watch how each side takes contrairian views all of a sudden. – Alphadogg 8 years ago

8 Answers


5

There is a small business tax credit: http://online.wsj.com/article/BT-CO-20100321-704391.html?mod=WSJ_latestheadlines

"Beginning in 2010, small employers
can elect a tax credit for 50% of
their employee health care coverage
expenses. Small employers are
generally defined as businesses with
no more than 25 employees."

Hard to say how much it will pad higher taxes on startups.
answered Mar 22 '10 at 12:58
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Henry The Hengineer
4,316 points
  • Henry, I couldn't read the full article without subscribing, but my understanding is that this credit only applies to small businesses with employees. Granted, the majority of small businesses have at least one employee, but what about those startups that don't yet have employees? I'm not saying you don't have a valid point, just playing devil's advocate here. – Zuly Gonzalez 9 years ago
  • Just some of clarification re: Zuly's question above, startups that don't have employees are not subject to the mandate. – Henry The Hengineer 9 years ago
  • http://www.nfib.com/issues-elections/issues-elections-item/cmsid/51105/ (1) Only firms with 10 employees or less will receive the full credit. 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 an average of $25,000 or less are eligible for the full credit. The credit is reduced as the average wage goes up, stopping when it reaches $50,000. (3) Only firms covering 50% or more of insurance costs will be eligible. (4) The credit is only available for a maximum of six years. – Henry The Hengineer 9 years ago

7

Unless your small business buys $27k insurance plans, has employees making more than $250k/yr, or does a lot of tanning, there will be no new taxes as a result of this bill. There are some penalties that kick in if you have more than 50 employees and don't offer insurance, but for the most part, small businesses will get tax credits and will have better plans to choose from due to the exchanges. And because individuals will also be able to buy plans without worrying about pre-existing conditions or continuity of coverage, it may fuel a lot of new startups as people can leave their existing jobs without losing healthcare. And as Gary mentioned, there are some tax credits that kick in to help some small businesses offer healthcare.

Here is an overview - if you don't trust the source, you can search and you'll find roughly the same information from the major news organizations.

answered Mar 22 '10 at 22:49
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Brian Deterling
984 points
  • Don't you believe this. Everyone has to have coverage of a certain type. Small business is going to pay for it all businesses will manage it for uncle sam. – Jane 9 years ago
  • News organizations aren't reliable sources of information, they are just repeating what they get from the powers that be. The truth is, no one knows how much it will cost in the long run. And if costs run amok look to more taxes on small business. – Joe A 9 years ago
  • Just read the bill itself if you don't believe news organizations. You can easily find it online. When someone asks how a new bill will affect small businesses, it doesn't help much to ignore the bill itself because you don't agree with the politics of it. And when addressing the affect on small businesses, you have to compare it to the status quo which guaranteed costs running amok. – Brian Deterling 9 years ago
  • Great answer and comment replies. Bang on. – Alphadogg 8 years ago

3

Fyi, small businesses with fewer than 50 full time employees are exempt from requirements. See "SEC. 4980H. SHARED RESPONSIBILITY FOR EMPLOYERS REGARDING HEALTH COVERAGE." of the bill.

http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.3590 :
Choose the last one on the list.

answered Apr 1 '10 at 17:10
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Henry The Hengineer
4,316 points

3

Hmmm...these are some interesting posts. I am certainly not an expert on the HC legislation that just passed or the HC debate in general (though I have read quite a bit of material on the subject).

I can speak as an expert on my individual situation. When I left my corporate job and tried to get health care I had very few reasonable options. Signing up as an individual required paying exorbitant fees (on the order of $700+ per month as a single individual in my thirties with no pre-conditions). Signing up as a company owner required my company to be in operation for 6+ months; the problem was that my company hadn't been in operation since I was just leaving my corporate job. Of course Cobra was an option at about $400 per month but that left me with limited flexibility.

When Cobra ended I was able to sign up for individual health care plans at rates that were cheaper than Cobra but those plans required that I had been a Cobra participant (I wonder what would happen for folks who were not coming off of Cobra).

I don't claim to have exhaustively found all possible options in the scenario above (though I did search very diligently and talked to many people). What I can say, is that I find the current situation (what I went through) to be quite daunting as a business owner. To use terms such as "slavery" when describing the recently passed health care legislation seems a bit over the top, no?

Here are some great articles on health care:

http://www.theatlantic.com/doc/200909/health-care http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande

answered Mar 24 '10 at 13:24
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Fractal Guy
254 points
  • Great comment. I have seen this too coming from a background in a family business. We shopped around and had to get a new insurance company every 1-2 years because of our small size and number of comp claims (employed a lot of laborers). It was a constant battle with the insurance company and we were always paying a high price. If you have less than 20 people it is extremely difficult to get a reasonable package. – Joe 9 years ago

3

It has already passed.

It will clearly help small businesses, but not for 4 more years when all the provisions take effect. Have you ever tried to get health insurance for a small startup? If I have one or two employees it is currently virtually impossible to get group insurance. That means even if I'm willing to pay for the new employee's individual health insurance plan there is no guarantee that employee can get health insurance. So who is going to accept a job at my startup without knowing if they also get health insurance???

answered Mar 22 '10 at 14:38
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Gary E
12,510 points
  • Gary, excellent point. However, you asked who would work for your startup without knowing if they will get health insurance. The answer is many already do! – Zuly Gonzalez 9 years ago
  • You are looking to the government to pay heath insurance for your employees? Guess who the government is asking to pay for it. People who actually earn money. So unless your business isn't profitable, you're believing the government will more efficiently provide health care for your employees than you can. Ain't gonna happen! – Jane 9 years ago
  • Please carefully *read* what I said above. I *clearly* state my small firm can *not* currently *buy* health care for my employees. We are too small for a group policy. No matter how much money my business is willing to spend, there is *no* health insurance policy available for a person with a pre-existing condition. How can I create new jobs when I can't offer a basic benefit like health care? Your irrational comment on asking the government to provide health care is typical of the current state of fear mongering in the political process. It has no place here. – Gary E 9 years ago
  • Zuly is right that there are some people who will work for a startup without health care. Typically the young and healthy people without children. But this severely limits the pool of available employees. – Gary E 9 years ago
  • Gary, You don't have to buy a group policy as a small business. They are often pricey with options you don't need and terribly expensive because group plans (in most states) cannot exclude preexisting conditions. Individual plans are cheaper because the plan is priced according to qualifying for coverage.cWe are all on individual HSA compatible policies and like them very much. – Keith De Long 9 years ago
  • Keith, I have an individual HSA plan for myself. But you seem to be missing the point. There is **no** guarantee that an individual policy can or will be issued. I can promise to pay for an individual insurance policy a prospective employee, but since you can not even predict whether such a policy will be issued by the insurer, what do you tell your prospective employee??? Maybe you get health insurance and maybe you don't? Health insurers randomly reject applicants who have taken any anti-depresent or cholesterol lowering drug! – Gary E 9 years ago
  • I was unable to work for a startup once due to my *wife* pre-existing condition making my entire family ineligible for *any* coverage. – Alphadogg 8 years ago

2

You are right to be very concerned. You cannot put the government in charge of nearly 20% of the U.S. economy without severely impacting the free markets. This is a very sad day for capitalism, free markets and personal liberty.

On a practical level, the federal government has just nationalized our health care system with at least a trillion dollar price tag to taxpayers. That means successful small business owners are in the perfect tax bracket to bear the brunt of the responsibility for paying these huge costs (which are most certainly under estimated). Another huge chunk of money to another inefficient government program will limit risk, growth and expansion of business. Especially small business.

Secondly, every US citizen will now be required by law to obtain and maintain certain types of health coverage. Who has the government already decided is obligated to monitor and pay for insurance? (think medicare, medicaid, social security, unemployment insurance, worker comp, employee retraining, etc.) Employers. Who will bear the cost and administrative burden for all these new requirements? Employers. Who can least afford all these regulations. Small Business owners. This is a very bad day for capitalism indeed.

answered Mar 23 '10 at 01:49
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Keith De Long
5,091 points
  • What is the only way to currently get affordable health care? Get an insurance package. Currently, who can get insurance packages? Large established companies or persons wealthy enough to afford it privately. If you ask me, a "free" society is not one where only the top echelon can afford health care. Yes the new bill makes it mandatory for everyone to have insurance. However, this will open up the doors for a lot more competition to come in, more choices, and more affordable prices for insurance packages. No longer will the insurance companies have a noose around your neck. – Joe 9 years ago
  • Your argument has almost no relationship to reality. Every employee in our small company has an affordable HSA compatible health insurance policy and a health savings account that allows them to make their own health care. They are all individual plans go with them if they leave the company. Who exactly is it that can't get affordable health insurance? – Keith De Long 9 years ago
  • +1 definitely crosses the line of constitutionality. (As are most of the large federal programs/spending) – Tim J 9 years ago
  • Congratulations that your company works that way. Many individual and small groups have a difficult time getting insurance plans. The main way in which the state of USA healthcare conflicts with free market is THE COUPLING OF HEALTH INSURANCE WITH EMPLOYMENT. This is a barrier of entry to start ups, and makes job transfer more difficult. Both of these obviously discourage enterprise. While the implementation is a whole other issue (as as it seems - falls well short), it is a very good idea to try to change this – Jon Darkstar 8 years ago

1

I live in Canada so I can't speak to the situation in the U.S. All I can say is that universal health care is one of those things you will one day wonder how you lived without.

I'm not straight on all the facts as it's difficult to be. It does however seem logical that the government is trying to help the people. Obama seems to be trying to address a need in society. By removing the special interest Health Care comanies. There is a reason why they have so many lobbyist and it's not to help the people. There is no question the rich will be taxed more. In fact Canada has higher income taxes then the U.S.

In Canada we have a "profit sharing" agreement between the provinces for instance BC, AB (oil country), Ontario and sometimes Quebec, are profitable provinces while some years other provinces are as well. Basically money from the big provinces is distributed to the small ones to ensure the same social services in NewFoundLand as you get in Alberta. The reason I bring this up is that when it was brought into place there was outrage. Now it is entrenched in our constitution. Because as a Country we move forward not as individuals.

I think health care reform is a great step for the U.S. on the path of becoming the country it can be.

answered Apr 2 '10 at 01:12
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Erik
89 points
  • I don't see many non-Canadians lining up to get procedures or care in Canada, but I do know lots of people try to get to US for healthcare. – Tim J 9 years ago
  • Erik, you didn't answer my question. Can you please share with us how the implementation of universal health care in Canada has impacted small businesses? – Zuly Gonzalez 9 years ago
  • Tim good point, but if you have money in Canada, it really doesn't do you any good in the sense you can't "buy" your health-care as in the U.S. In Canada it's pretty even. There has been a debate raging in the last 10 years about a two-tiered system. Some provinces have it others don't. Zuly, I'm not sure but maybe you van answer it yourself....you will have slightly higher taxes there is no doubt, Canada sits between the U.S. and Europe in taxes. On the flip side you have less costs for health insurance and no matter the company it's a non issue. Therefore attracting talent at a smaller firm – Erik 9 years ago
  • cont...attracting talent at a smaller firm is easier since employees don't need to worry about health insurance. – Erik 9 years ago

0

The prevalence of employer-based health care is a huge impediment to the free market. The fact that employers generally pay some of health care, and more importantly, collect those oh-so-critical "groups" within their walls, greatly increases the barrier of entry for start up companies. It also discourages job mobility. The ways in which these two phenomena hold back enterprise/innovation should require no explanation.

A REAL public option (not that we're getting one) or a national exchange that gives individuals/small groups options, would go a long way to remedy this.

answered Dec 1 '10 at 08:31
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Jon Darkstar
111 points

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