Small businesses unsure about impact of health care

By Dennis Seid/NEMS Daily Journal

While major portions of the recently passed health care bill don’t go into effect until 2014, somebody has to start paying for the nearly $1 trillion program.
For example, starting in 2013, taxpayers with earned income of $200,000, or $250,000 for joint filers, will see their 1.45 percent employee portion of Medicare tax increase by 0.9 percent.
Also that year, taxpayers with adjusted income of more than $200,000 ($250,000 for joint filers) will be subject to an additional 3.8 percent tax on net investment income, such as interest, dividends and capital gains.
But most small business owners, including those in Northeast Mississippi, aren’t sure how much they’ll have to pay for expanded health care coverage.
Michelle Dimarob, manager of legislative affairs for the National Federation of Independent Business, a small-business lobbying group, told McClatchy News that its members “are still trying to wrap their head around everything that’s in this law. The next question that comes out of their mouths is: ‘What do I have to do right now?’ They need to start talking with their accountant, depending on how they’re organized, what industry they’re in and whether they’re offering insurance now and what kind they’re offering. We’re suggesting they talk to their agent or broker.”
But according to Mike Chaney, Mississippi’s insurance commissioner, agents and brokers are feeling a bit uneasy, too.
“They’re confused like a lot like us insurance commissioners,” said Chaney, who was at Mississippi State University last week at an insurance symposium that included his fellow commissioners from Alabama, Arkansas and Louisiana. “We don’t have a firm set of regulations in front of us, so we’re asking everyone to be patient as we wade through this 2,400-page bill.
“But if you’re an agent, you have a lot of questions about what you can or can’t do and what you can or can’t sell. Right now, we’re waiting for clearer direction” from U.S. Health and Human Services Secretary Kathleen Sebelius.
Under the health care legislation, Health and Human Services is responsible for clarifying crucial parts of the bill, but it has not given a timeline.
What is clear under the new health care bill is that small businesses now qualify for a special tax credit that will help them offer health insurance coverage for the first time or maintain the coverage they have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.
“The credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees,” said Internal Revenue Commissioner Doug Shulman last week. “We urge small businesses and tax-exempt employers to look closely at this important tax break – which is already effective – to see if they qualify.”
The tax credit is estimated at $40 billion from 2010 to 2019, an average of $4 billion per year. About 3.6 million small businesses will qualify this year for the credit, according to the Mississippi Health Advocacy Program.
Beginning this year through 2013, businesses with fewer than 25 full-time employees that contribute at least half of the total premium will be eligible for tax credits of up to 35 percent of the employer contribution. The full credit will be available for businesses with fewer than 10 employees averaging less than $25,000 in annual wages, and a phase out at $50,000. Nonprofit groups will qualify for tax credits of up to 25 percent of the employer contribution.
Starting in 2014, eligible small businesses buying health insurance coverage through an exchange will get tax credits of up to 50 percent of the employer contribution if the employer provides at least half of the premium cost. Nonprofits will qualify for tax credits of up to 35 percent.
Seasonal employees won’t be counted when determining eligibility. And businesses can claim the credit for any two years in the future. Sole proprietorships and family members are explicitly excluded from the small business tax credits, but can apply for individual tax credits.
According to MHAP, only 20 percent of Mississippi businesses with fewer than 10 employees offered health insurance in 2008.
In 2014, employers with more than 50 employees will be required to offer health insurance coverage or pay annual fines of up to $2,000 per worker each year if any worker gets federal subsidies to buy health insurance.
But there is at least one small business group that knows that it will be paying for health care soon enough.
In the bill is a provision that requires a 10 percent excise tax on indoor tanning services. Tanning salon owners can either eat the tax or pass it along to consumers.
“In the end, somebody’s going to have to pay for this nearly $1 trillion bill,” Chaney said. “And when has a federal program met budget projections?”
Chaney says that the health care bill is an unfunded mandate on the states, and that everyone will be paying for it, no matter the official language in the bill.
His office, for example, must hire up to four people to help implement provisions in the legislation. Other administrative costs mean an additional $250,000 to $500,000 annually.
“We’ve already had our budget cut, and now we have to figure out a way to pay for implementation of this bill,” Chaney said. “How do you do that during a time of economic uncertainty and budget shortfalls?”