Entrepreneur's Journal: What the Obama Health Care Bill Means to Your Business


Despite the heated politics, business owners need to have an understanding of President Obama's $940 billion health care plan. So, I've talked with various experts on the matter.

And while things are far from set, there are some general things to consider.

Small Business Health Options Programs (SHOP Exchanges). Each state will need one by 2014. Basically, a SHOP exchange allows for purchasing pools for small businesses. In other words, this should allow for more leverage. In fact, there will also be various tax credits to encourage participation (for the first two years).

Of course, it's far from clear how much this may lower costs. Keep in mind that, by the time SHOPs hit the market, insurance premiums may have already increased significantly. After all, carriers will need to find ways to make up for the removal of benefit caps as well as expanded coverage.

Subsidies and Medicaid. "By 2014, many self-employed will qualify for a federal subsidy to help them afford the cost of purchasing health care," said Sam Gibbs, who is the senior vice president at eHealthInsurance.com. "Those earning up to 400% of the poverty level will get assistance, or up to $88,200 for a family of four."

As for Medicaid, more lower-income people will be covered by Medicaid by 2014. This could be a big help to those starting a business because their earnings are likely to be lower.

Penalties. If your company has more than 50 full-time employees, then there will be a penalty if one or more full-time employees get a government subsidy for health insurance. The penalty is $2,000 per employee, which comes into effect in 2014.

Interestingly enough, this provision could incentivize businesses to stop hiring, especially as the headcount approaches 50. Or, it could mean an increase in layoffs.

Tax Break. "A small company may be eligible for a tax credit of up to 35% of the amount contributed to an employee's health insurance premiums," said Bob Meighan, a vice president at Intuit's (INTU) TurboTax. "This starts later this year." But of course, there are some hitches. For example, you must provide coverage for at least half the premium cost for employees. Next, you need to offer a group policy.

Finally, you get the the whole 35% credit if the average employee earns $25,000 and there are fewer than ten employees. From there, a sliding scale applies up to 25 employees.

Higher Taxes. Somehow, there will be a need to pay for the health care benefits, and this means new taxes. To this end, the law will inact a payroll tax for those single people earning more than $200,000 and families that earn more than $250,000. But the good news is that owners of small businesses are exempt.

"Cadillac" Insurance Plans. By 2018, there will be a 40% tax on the excess cost of premiums for insurance costing more than $10,200 for individuals or $27,500 per family. This could have a major impact on firms that have high-paid employees, such as law firms.

Tom Taulli advises on business tax preparation and is also the author of a variety of books, including The Complete M&A Handbook. His website is at Taulli.com.

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