Other than payroll, healthcare benefits represent the second or third largest cost center in any small business. Subsequently, too many small business owners often cannot afford to provide health insurance coverage for their employees. The current heath care debate presents an excellent opportunity to examine the pros and cons of the health care reform bill proposals.
Each week as Smallbizlady, I conduct interviews with small business experts on my weekly Twitter talk show #SmallBizChat. This interview is excerpted from my #SmallBizChat interview with Dawn Rivers Baker, one of the nation’s most prominent experts on microbusiness. Her activities on behalf of small businesses range from offering input on federal legislation to addressing audiences around the globe. She has followed the healthcare reform debate very closely.
Smallbizlady: What are the key features of the health care reform bill?
Dawn Rivers Baker: First, there’s more than one health care reform bill. There’s one in the House and at least two in the Senate. Common features include an individual mandate, tax credit for firms that offer coverage, “pay or play” provisions, and subsidies for poor folks. It also eliminates discrimination for pre-existing conditions, gender discrimination, and lifetime and yearly limits on coverage.
Smallbizlady: Is the healthcare reform bill good for small businesses?
Dawn Rivers Baker: It’s a mixed bag, some good, some bad but much better than what we have now. There is a $1,000 tax credit per employee ($2,000 for family coverage) each year, more if an employer contributes more than 60% of the health insurance premium.
Smallbizlady: Are their any down sides to the healthcare reform bill for small business owners?
Dawn Rivers Baker: There is a “Pay or Play” employer mandate that applies to firms with 10 or more employees. There’s also still no allowable premium deduction as a business expense. This means that self-employed Schedule C filers will still pay FICA taxes on health insurance premiums.
Smallbizlady: How will the health care reform bill affect small businesses who offer insurance benefits?
Dawn Rivers Baker: The only impact will be that they will have more choices of plans and more tax credits for coverage.
Smallbizlady: I have seen some statistics that say small business owners on average pay 18% higher insurance premiums than large businesses. A few years ago my firm’s healthcare premium was raised 62% with a month’s notice. Isn’t the health care insurance exchange designed to fix that?
Dawn Rivers Baker: The Health Care Insurance Exchange (HIE) can only be used by individuals (who don’t have acceptable coverage already) and (in two years) by employers with less than 20 employees. So, the plans offered in the HIE will give individuals and small businesses the group-negotiating power of a larger employer. This will hopefully eliminate things like what you experienced.
Smallbizlady: Will small business owners who do not offer health insurance before forced to do so?
Dawn Rivers Baker: You can’t FORCE them to provide health insurance. There will be a “pay or play” provision: cover your workers or pay into this kitty to help pay for premium subsidies.
Smallbizlady: What about mental health benefits under the health care reform bills?
Dawn Rivers Baker: The House Bill, America’s Affordable Health Choices Act of 2009 H.R. 3200 requires covered services, including hospitalization, prescription drugs, mental health services, preventive services, maternity care, and children health care including dental, vision, and hearing services and equipment. It limits annual out-of-pocket expenses to $5,000 for an individual and $10,000 for a family.
Smallbizlady: How are solopreneurs and 1099 freelancers covered under the bill? I believe it says if you don’t have coverage, you will have a 2.5% tax on your adjusted gross income.
Dawn Rivers Baker: It is not clear. It depends on what happens with the public option and with the health insurance exchange.
Smallbizlady: Will I get to keep my health insurance coverage, if I like it?
Dawn Rivers Baker: If you can afford to pay for it, yes.
Smallbizlady: What if you are a business owner whose health insurance is covered by your spouse’s job, will you need to provide health insurance to employees?
Dawn Rivers Baker: Yes, if you have 10 or more employees. The “pay or play” employer mandate applies to firms with more than 10 employees.
Smallbizlady: What should a business owner do who supports health care reform?
Dawn Rivers Baker: They should contact their elected representatives to express support. Use Congress.org to look them up if you don’t know who they are.
If you found this interview helpful, join us on Wednesdays 8-9pm ET follow @SmallBizChat on Twitter.
For more tips on starting or growing your small business subscribe to Melinda Emerson’s blog at www.succeedasyourownboss.com
“Reality Check FAQs,” WhiteHouse.gov, accessed August 11, 2009. http://www.whitehouse.gov/realitycheck/faq#i1
The List on Health Care (Insurance) Reform Bill Nowpublic.com August 7, 2009
“What exactly is in the Healthcare Reform Bill” Smallbiztrends.com, July 18, 2009 http://smallbiztrends.com/2009/07/what-exactly-is-in-that-healthcare-reform-bill.html
“Why We Need a Public Health-Care Plan,” Wall Street Journal, June 24, 2009. http://online.wsj.com/article/SB124580516633344953.html
“5 freedoms you’d lose in health care reform” Fortune June 24, 2009 http://money.cnn.com/2009/07/24/news/economy/health_care_reform_obama.fortune/
“Healthcare Reform Fit For Small Business,” BusinessWeek Small Business May 6, 2009 http://www.businessweek.com/smallbiz/running_small_business/archives/2009/05/health_reform_f.html