Small Business Advice Blog
Let us make your journey to success a little easier.
May 12, 2010
How will the New Healthcare Reform Laws Affect Me and My Business?
First, let me say that I would love to hear your thoughts about this law. I thought about trying to keep this factual rather than opinionated, but I am not sure that that would be possible, so you will see a business owner’s two cents every once in a while. If you want to talk about this law, please post on the forum section below the blog.
I am for every individual having good health and being well taken care of. The problem with this bill, is that it is at the expense of mainly the small business owner in America. If American small business owners are put out of business due to the high requirements of healthcare expenses, then who is going to employ the American citizen in this country needing that healthcare. Think about these little bits of information taken from the SBA Office of Advocacy:
Small firms:
• Represent 99.7 percent of all employer firms.
• Employ just over half of all private sector employees.
• Pay 44 percent of total U.S. private payroll.
• Have generated 64 percent of net new jobs over the past 15 years.
• Create more than half of the nonfarm private gross domestic product (GDP).
• Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).
• Are 52 percent home-based and 2 percent franchises.
• Made up 97.3 percent of all identified exporters and produced 30.2 percent of the known export value in FY 2007.
• Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.
First let’s start with the timeline. This law, also known as The Patient Protection and Affordable Care Act, does not go into affect all at once. There are various impacts over a period of time. The law was signed into effect by President Obama on March 23, 2010. The effects that start in 2010 are noted first.
June 23, 2010
- Businesses with 25 employees or less will be eligible for tax credits. (Please note that these tax credits, like most in this program, are only temporary and will not continue but for a few years)
- Employers with 10 or less employees and average wages less than $25,000 will receive the maximum credit allowed, 50% (35% for tax-exempt entities).
- Once the Insurance Exchanges are established, this tax credit will expire. I will talk about the Insurance Exchanges below.
- High-risk pools for individuals are established for many who are unable to currently get coverage by the Department of Health and Human Services
September 23, 2010
- Most health insurance programs currently have lifetime maximums written in the polices, these will be eliminated
- For dependent children under 19 years of age, pre-existing condition limitations will be eliminated
- Children will be allowed to remain on their parent’s health plan until their 26th birthday
- Indoor tanning services are subjected to a 10% service tax
January 1, 2011
- Over-the-counter drugs are affected
- No longer reimbursable under a health flexible spending account (FSA or Flex Spending Acct), health savings account (HSA), or health reimbursement arrangement (HRA)
- Only Prescription drugs are reimbursable under these programs
- HSAs are affected
- Penalties for withdrawals for non-medical expenses will be increased from 10% to 20%
- Health Insurance Providers
- Individual and small group providers must spend at least 80% of the premium dollars collected on medical services
- Large group providers must spend at least 85%
- Employers
- Those with 100 employees or less will become eligible for wellness grants for up to 5 years
- Required to disclose the value of health benefits on all W-2’s created. The Values must be based on COBRA premiums
- All Companies
- Are required to issue a 1099 on any vendor of services or rental property above $600
***Sole-Proprietors*** I want you to think about this one. If you are a sole-proprietor and you have not obtained your EIN, please do so now. If by Jan 1 2011 you have not, you will have to start giving out your social security number to every customer you charge over $600. Not only your social, but your legal name and address. I worry about identity fraud come time for this part of the law to be enacted. If you have you EIN, you can just give your name, address, and EIN. This is much better than handing out your social.
***All Others:*** Be sure to obtain the following information at the beginning of a service just in case a 1099 is required later. You don’t want to have to track these people down at the end of the year.
- Legal Individual or Company Name
- Address
- EIN or Social Security Number
- Early Retirees
- Become Eligible for a temporary reinsurance program
- Those age 55-64
- Plan ends on January 1, 2014 or until the $5 billion in funding allocated to the Program is exhausted
- A good source of information on this section is at McDermott Will & Emery
- CLASS long-term care program established
- Federally subsidized, employers may voluntarily participate in this program
- If the company enrolls, employees will be automatically enrolled and subject to payroll deductions unless they choose to opt out.
January 1, 2013
- FSAs are affected
- Contributions are capped at $2,500 per year
- High-Income Individuals
- Individuals making $200,000 or $250,000 for couples – give me a break, high income. Sorry folks, but if this is a large family with 5 or more kids, $250,000 doesn’t go a long way. I think this is a ridiculous number to choose as “high-income.”
- Hospital Insurance tax imposed of 0.9%
- 3.8% Medicare tax on all dividends, interest, and other unearned income imposed
January 1, 2014
- ALL individuals
- MANDATED to obtain health care coverage
- Pre-existing conditions will be eliminated
- Annual coverage limits and deductibles eliminated
- State-based Insurance Exchanges established – I will go into more detail below
- Employers
- For each employee working 30 hours or more per week paying between 8-9.8% of household income in health coverage, required to provide “Vouchers” toward the purchase of state insurance exchanges
- Coverage required or a penalty of $2,000 per employee for those with 50 employees or more
- Penalties imposed for any employee that the company does not contribute at least 60% of the cost of the premiums
- The first 30 applicable workers are exempt
- Permitted to offer employees incentives up to 30% of the cost of a wellness program
January 1, 2018
- High-cost health plans
- A 40% excise tax imposed
- Exceeding $10,200 per year for individuals or $27,500 for family plans
Vouchers
What is a voucher? Employers will b e required to provide “vouchers” toward the purchase of health insurance through a state exchange for any employee working 30 hours or more per week. They would also pay between 8-9.8% of their household income for healthcare. Employers will re required to notify all new-hires about this option and availability of the exchange-based coverage and their eligibility for a subsidy.
State Health Insurance Exchanges
These are health plans that will be offered mainly to individuals and small businesses. These will be state controlled and subsidized.
Carter Services Plus offers accounting services, bookkeeping services, payroll services, training, marketing advice, tax preparation services, and consulting among various other financial services. Please feel free to call us to set up a FREE consultation to review your current financial situation or to find out if we are the right fit for you.
