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.