Leading Question

By Brad Edmondson April 30, 2010

Barack Obama promised us change, and the Patient Protection and Affordable Care Act delivers a ton of it. The healthcare bill passed in March clocked in at more than 2,000 pages, and it left a lot of small business owners worrying about what it means for them.

Oh, relax. The next year won’t be that scary, unless you’re an insurance agent. Here’s a quick tour of the next

12 months, and a peek at bigger things looming on the horizon:

A cap on insurance overhead. Starting in 2011, companies that sell health insurance will be required to show that at least 80 percent of their revenue from individual and small-group plans pays medical costs; for plans covering 100 or more workers, the proportion is 85 percent. “That is a very skinny margin,” says Jeff Grady, president of the Florida Association of Insurance Agents. “We’re concerned about what it means for agents’ commissions, and we’re trying to fit them into the new system. If the margins are too skinny, they’ll go out of business.”

A tax credit for small health insurance plans. Some small businesses will be eligible for a 35 percent tax credit to offset the cost of a health insurance plan from 2010 through 2013. A qualifying business must have fewer than the equivalent of 25 full-time workers (two half-timers equal a full-timer, and seasonal workers are excluded). The employer must pay average annual wages of less than $50,000, and it must also pay at least 50 percent of the cost of employee health coverage. Qualifying not-for-profit organizations can get a 25 percent credit. This could have a big impact in our market because so many construction and retail businesses will qualify. “We haven’t had a lot of questions about this yet,” says Jacqueline Dezelski, VP of the Manatee Chamber of Commerce, when contacted in early April. “But we expect to, since it will apply to a lot of our members.”

Less help with prescription drug benefits. Large employers who began covering the cost of prescription drugs in 2003 got a tax credit to offset that cost, and they were also allowed to deduct the full cost of their plans. “It didn’t make sense to let someone deduct as an expense something that had already been paid for by taxpayers,” says Uwe Reinhardt, a healthcare economist at Princeton University. Beginning in 2010, employers who offer this benefit will only be able to deduct part of their costs. But only a few Florida companies will be affected.

Spelling it out. The value of an employee’s health benefit must be put on W-2 forms in 2010.

Grants for wellness programs. The Department of Health and Human Services will give away $200 million to businesses with fewer than 100 employees to provide access to comprehensive workplace wellness programs.

Most of the big changes in the system won’t happen until 2014, including a requirement that all businesses with the equivalent of 50 full-time workers offer health insurance or pay a fine, and the creation of state-run, federally supervised exchanges designed to make health insurance less expensive.

But first there’s the long-shot lawsuit from 14 state attorneys general (including Florida’s) that challenges the law’s constitutionality, and the 2010 midterm Congressional elections, and Obama’s re-election campaign to consider. That’s what worries Mark Wilson, president and CEO of the Florida Chamber of Commerce, which did not support the bill.

“We’ve had a historic change in social policy,” he says. “History will tell us whether it’s a good idea or a bad idea. But in the short term, most of the small business owners I talk with are confused. We’re afraid that means they will take a wait-and-see attitude toward investing in their businesses, and that will slow down the recovery.”

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