Small Business: DOA Under Latest Health Care Reform Proposals

Small business owners have been on pins and needles all year awaiting the definition of “small business” in the health care reform proposals being tossed around. Well, those needles won’t be poking us with a pain-relieving shot in the arm. Turns out that pretty much all the job-producing small businesses will be going under the knife if any of the current proposals are adopted.

On Tuesday the House Committees on Education and Labor, Ways and Means, and Energy and Commerce released the House Democrats’ massive healthcare reform bill. America’s Affordable Health Choices Act (H.R. 3200) had been delayed because of controversy over the public health insurance option (Exchange) and the pay-or-play mandates for businesses. The new version supposedly softens the blow for small employers . . .

Here’s what’s being proposed, as taken from the summary of the legislation:

  • Employers would contribute 72.5 percent of the cost of premiums for all full-time employees’ health coverage and 65 percent for a family policy.
  • Employers have the option of providing part-time employees with health coverage by contributing a share of the expense, or contributing to the Exchange in order for part-time employees to seek coverage there.
  • In the fifth year after the Exchange begins, companies that offer health insurance would have to meet minimum coverage standards like those required of plans in the Exchange.
  • If an employer chooses not to offer health coverage to its employees, a penalty will be assessed based on the size of company’s payroll, which will fund the Exchange.

Which brings us to small business. We’ve heard for months that “small businesses” would be exempt, but we haven’t been told how small business would be defined under this legislation. Well, let’s see . . . exempt “small businesses” under this legislation are those with payrolls under $250,000. They would not be subject to the pay-or-play mandate. But, raise your payroll $1 more and the game changes. Businesses with payrolls over $250,000 would be subject to a payroll penalty that starts at 2 percent; if you are a small business with a payroll of $400,000, you are subject to the full 8 percent penalty, the same rate as your corporate counterparts AND one that is higher than the current 7.65 percent FICA that employers pay.

Let’s do some quick math. If you have a payroll of $400,000, you might employ 10 employees with an average salary of $40,000. That’s a small business, folks, any way you slice it. Moreover, these are the job-producing small businesses. These are the businesses that are growing, are gaining momentum and are historically the ones that pull the country out of recession. But if this legislation passes, you can forget small business’s role in that, unless they happen to be a manufacturer of wheelchairs, ventilators or body bags – many small business owners will be needing them.

Stay tuned to this blog . . . there’s more to come, but I need a drag of oxygen before I can finish.


About Smart Companies Thinking Bigger®

Kelly Scanlon is the owner and publisher of Thinking Bigger Business Media. She recently finished a term on the national board of directors of the National Association of Women Business Owners, and was the national chair from 2010-2011. An advocate for small business owners, Kelly sits on numerous boards and committees to advocate on behalf of small business owners. She has won several awards for her advocacy. Among them are the 2011 United Nations NGO Positive Peace Award on behalf of Kansas City area small business owners, the U.S. Small Business Administration's Region VII Women's Business Champion of the Year in 2009, and the Women in Business Advocate of the Year from the State of Kansas in 2006. In 2002, she won the SBA's Region VII Small Business Journalist of the Year Award (Missouri, Iowa, Nebraska, Kansas). Whatever your business stage—aspiring, startup, established, mature—Thinking Bigger Business Media has the resources you need to grow to the next level. We are a resource organization dedicated to providing the strategic, "how-to" information small business owners need to become more productive and more profitable. We also provide information that helps owners connect with resources within the business community that can help them grow. We deliver that information through a variety of media products and other channels easily accessible to business owners.
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