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Health reform law concerns area small businesses
In the wake of sweeping health care reform legislation approved this spring, many small-business owners are confused and concerned about how they will be affected.
The 1,017-page Patient Protection and Affordable Care Act, signed into law in March by President Barack Obama, requires employers with more than 50 employees to offer health insurance coverage or face fines by 2014.
"The threat of penalties also will serve as a barrier to many companies to grow and hire new employees," said Karen Buschmann, vice president of communications for the Missouri Chamber of Commerce and Industry.
Businesses with 49 or fewer full-time employees who do not offer insurance will not be penalized, said Thomas McAuliffe, policy analyst with the Missouri Foundation for Health, a not-for-profit, nonpartisan agency that distributes health grants. Full time is defined as working 30 or more hours per week.
Businesses with fewer than 25 full-time employees will be eligible for tax credits of up to 35 percent of their cost in 2010 and up to 50 percent by 2014, the act states.
Dennis Vinson, owner of Signature Packaging & Paper Inc. in Jackson, said the tax credit will help entice businesses to offer health insurance but that employers should provide insurance because healthy employees are more productive.
"Employees are the backbone of what I do here," said Vinson, who offers insurance to his 35 employees. "I'm looking out for the well-being of my employees."
Some local business owners say the tax credit isn't enough to offset coming cost increases.
"Our insurance is going to go up so high the tax credit isn't going to make a difference," said John Johannes, president of Premium Mechanical in Jackson, which employs about 40 people. "The government is trying to make everybody healthy and happy, and that's just not possible."
Johannes offers health insurance to his employees at no cost to them. Because his employees are fairly healthy and don't make many claims, he said, the rates he pays are good.
The Patient Protection and Affordable Care Act requires states to offer insurance exchanges by 2014. Health insurance exchanges will have websites where small businesses and individuals will be able to compare and buy insurance coverage plans with varying levels of benefits from many companies. The legislation leaves the responsibility of establishing these insurance exchanges up to the states, and McAuliffe said many of the details of how they will work are yet to be determined.
"The idea is that insurance companies will compete with each other, resulting in lower prices and reduced administrative costs," McAuliffe said.
Creating a large pool of small employers allows insurance companies to spreads health risks over a larger number of people, driving prices down, McAuliffe said.
But Johannes said a larger pool of people includes higher-risk individuals and is more likely to increase his insurance costs. Employers will not be required to buy their policies from the new insurance exchanges and may keep their existing providers, McAuliffe said.
There will be changes made this year that apply to all insurance companies, including removing lifetime limits on coverage, prohibiting charging for preventive care doctor visits and mandating coverage for dependents up to age 26.
The new health care act imposes penalties on companies with 50 or more employees that do not provide insurance. Businesses will be fined annually $2,000 per employee not counting the first 30 employees. For example, a company with 50 employees would be fined $40,000.
"As premiums rise, some businesses will see that it will cost less to drop the coverage and pay the fine," Buschmann said.
Congress' Joint Committee on Taxation estimates employers will pay $52 billion over 10 years in penalties, she said.
These fines paid by businesses will go into a trust fund to help provide health care for the uninsured and underinsured, McAuliffe said.
"So if you make an active decision not to offer insurance, essentially you're giving money to the government to cover your employees," McAuliffe said.
Employers do have the option of taking money they would have spent to buy insurance coverage and giving it to workers in the form of a voucher they may take to the new health insurance exchange and can use it toward the purchase of an insurance policy.
McAuliffe said a failure of the health care reform act is that it does not adequately address the costs of health care.
It does establish an Insurance Rate Authority to look at premium increases to determine what is acceptable.
"This new authority has no authority over insurance companies," McAuliffe said. "There's no incentive for an insurance company to go to a hospital and tell them to start charging less, to say charging $50 for a Tylenol is no longer acceptable."