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Obamacare and Business

| October 01, 2013

There have been countless news articles concerning the implementation of this new law and the details are both complex and enormous. Regardless of your opinion of this massive new bureaucracy, it is going to be a tremendous and costly burden on all of society, but especially on business. Even if the healthcare costs are somehow contained, which we doubt, the reporting and recording keeping requirements will be an ongoing concern/added cost without end.There are many detailed explanations concerning the new law and we do not want to just add one more. Instead, we wanted to give you a very brief synopsis of the major items effecting businesses, especially small businesses.Reporting Requirements – Beginning immediately, businesses with revenue in excess of $500,000 must provide notices to their employees concerning whether or not they provide health coverage. Sample notices are available at Just this burden alone is ridiculous, forcing small businesses to take time to formally tell employees what they most certainly already know.In addition to this requirement, employees must also be informed about the availability of the “health exchanges” and provided with a summary of benefits with which to compare their plans with those of the exchanges. These summaries are to be “in an easy-to-understand grid.” (No, I am not kidding)Small Businesses – The only sliver of good news in the law is that most small businesses will be exempt from some of the more costly provisions. Businesses with less than 50 employees are not included in the “employer mandate.” This means they will escape the penalty for failure to provide insurance for their employees.In addition to exempting them from the penalty, the law provides incentives to encourage small businesses to provide, or at least to assist in obtaining, health insurance for their employees. First of all, the law establishes small business health exchanges that are supposed to provide a quick and easy (yes, I am laughing) method of comparing various plans at competitive prices. They are, of course, not yet widely established, not quick, not easy and not competitive.Besides these exchanges, the law also continues and expands a credit for small businesses who do provide employee health insurance. The credit is available for businesses with less than 25 employees (actually employee equivalents – we won’t even get into that) and average wages of less than $50,000. Most businesses at this level do not provide health insurance and this credit is very seldom used.Larger Businesses – Starting in 2015 (it was, of course, delayed), any employer with 50 or more full-time workers (again, actually equivalents) will be assessed a penalty for each worker if they do not provide health insurance. Also, if their plan does not meet the law’s “affordability test” they will be assessed a $3,000 annual fine for each worker that goes to a health exchange and gets subsidized for it.So, before thinking this affects only large companies, remember any business, in order to stay in business, must pass costs along to their customers at some point. In addition, the definition of full-time begins at 30 hours per week. This means many people who have worked more, will now be working less to avoid the definition of full-time.Additional Business Taxes – In addition to reporting requirements and punitive penalties, the law established several new taxes that will apply to businesses in various ways.Health insurers will be subject to new taxes each year that are supposed to raise $8 billion in 2014 alone. Starting in 2014 small businesses will pay a $63 per-person fee to cover the costs of the health exchanges. There is also fee imposed on issuers of policies to fund the “Patient-Centered Outcomes Research Institute.” (I really cannot be sarcastic enough to make a comment here)On top of all that, there is a “Cadillac Tax” on all plans that provide too much coverage. Too much coverage is defined as health coverage that goes beyond $10,200 for individuals and $27,500 for families.Final Thoughts – Well, as you can see it is a mess. The law is full of onerous reporting requirements and punitive penalties. Much of the act would be considered silly if it were not so destructive and actually the law.