The long debate over health care reform has ended, leaving many small business owners more confused than ever over what to expect. But they know one thing — they’ll be paying for it for years to come.
The package won’t be fully implemented until 2018. However, there are important provisions that will be effective this year, in 2011 and 2012 that entrepreneurs need to begin planning for now. The changes largely involve new taxes, fees and mandates on individuals and small business.
In 2010, a temporary tax credit will be available for a limited number of firms who provide qualified health coverage. However, the credit puts small business owners through a series of complicated tests to determine the amount of the credit. 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 will get no credit at all.
In addition, 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. Also, only firms that cover 50 percent or more of insurance costs will be eligible. Even if your business is one of the 12 percent that will qualify, the credit is only available for six years.
In the meantime, other provisions that will drive up costs include an assault on one particular industry, a 10 percent tax on indoor tanning services begins July 1.
Beginning in 2011, new changes take effect that will increase costs and limit choices. Those changes include:
• New limits on HSAs and FSAs — Consumers will be prohibited from using health savings accounts and flexible spending funds to purchase non-prescribed items, including over-the-counter medication (except insulin).
• Federally subsidized long-term care — Small businesses may voluntarily participate in a new long-term care program. Participating firms’ employees will be automatically enrolled and subject to payroll deductions unless they choose to opt out. This program means more paperwork and will almost certainly cost far more than what the deductions will cover.
• A brand-name drug tax — Manufacturers and importers of brand-name drugs will pay a tax of $2.5 billion in 2011, $3 billion per year for 2012 through 2016, $3.5 billion for 2017, $4.2 billion for 2018 and $2.8 billion for 2019 and thereafter. This tax is certain to be passed along to consumers.
In 2012, small business owners will face a tremendous new burden. They will have to send to the IRS a Form 1099 for each and every business-to-business transaction of $600 or more. We expect that the IRS will hire as many as 12,000 new auditors.
Further out, we’ll see new taxes, an expensive, federally mandated minimum benefits package and additional complex mandates on individuals and employers who will face penalties if they don‘t comply.
In the meantime, small business owners will struggle trying to gauge the costs and understand the impact of a new law they neither wanted nor asked for, rather than the solutions that would actually help them cope with the rising costs of health care. No doubt when November comes, small business owners will remember who forced this reform on them and cast their vote accordingly at the ballot box.
Dan Danner is president and CEO of the National Federation of Independent Business in Washington, D.C.