How Does the Obama Health Bill Impact Small Businesses?
About as far as you can mosey from the health care reform heat of Washington, D.C., sits Avogadro's Number, a quirky sub shop in Fort Collins, Colo., where you get a free veggie sub on Mondays for each one you buy.
That freebie sub is darned important at a time when folks are pinching pennies. So, too, is health care reform.
As far as shop owner Rob Osborne is concerned, the historic health care reform package that President Obama plans to sign into law today, is a lot like Osborne's sub sandwiches: A little bit of this. A little bit of that. And, in the end, made to look digestible.
So Osborne is holding his nose and is willing to bite - even swallow - health care reform, even though he suspects it's going to hurt his shop's bottom line, and he may have to raise prices.
"My feeling is: No action is worse than some action," says Osborne, 55, who has owned the shop for 30 years that employs 35 workers to whom he does not provide health care. "In principle, people should have health care. They've got to take a stab at it somewhere. But from a practical standpoint, I don't really know what's going on."
That comment - not understanding what health care reform really means to a business - seems the common reaction from small-business owners. In a nation of more than 29.6 million small businesses with about 58 million employees, it seems less a matter of being for it or against it and more a matter of not understanding what it means for them.
Many also seem to be trying to push the whole issue aside until they can't any longer, even though the bill utterly changes the way small-business owners will purchase and provide health insurance for themselves and their employees. Among those who have more than 50 employees - and who are still trying to survive the fallout of the financial meltdown - some are focusing on the fact that many of the provisions won't kick in until 2014.
"When you're already overwhelmed with change and hear there's one more coming, you say to yourself that you'll deal with it tomorrow," says Jerry Jellison, a small-business consultant who specializes in implementing change. "My clients tell me that when the wolf is in the bedroom with his mouth wide open and he's slobbering on them, that's when they'll deal with it."
For his part, Pedro Alfonso, co-founder of Dynamic Concepts, a technology firm in Washington, says he still faces a lot of thinking, soul searching and number crunching to see how it will affect his firm of about 60 workers.
"I am still a bit confused and a bit lost on some aspects of the bill and how it's going to affect me as a small business," he says.
He currently offers to cover 60 percent of his employees' insurance costs. About two-thirds of his workforce takes him up on that option. His workers run the gamut in terms of health needs: He has younger, healthy workers who don't opt for insurance, and other, less-healthy workers, such as one on dialysis, who need the benefits, he says.
While he's supportive of the bill as an individual, he's skeptical as a business owner. He's kept up on reform news through industry organizations and reading newspapers, "But I still haven't been able to translate what it will cost the business, and that's where the fear comes from," he says. "When it's all said and done, how does it impact me?"
No immediate impact
The health care bill will affect businesses of all sizes - from megacorporations to those with just one or two workers. And it will affect them in dramatically different ways. For instance, provisions exist for companies that have fewer than 10 employees - and for those with fewer than 100.
"For small and medium business owners, the impact is not going to be immediate," says Dave Osterndorf, chief actuary of consulting firm Towers Watson's global health and welfare practice.
A look at some of the provisions and their effects:
- By 2014, employers who have more than 50 employees must offer health insurance benefits or pay penalties. Companies with 25 or fewer employees who meet certain wage requirements will also be able to get credits toward health insurance purchases.
- By 2014, small-businesses owners, the self-employed and those who don't get work-provided coverage can get benefits through Small Business Health Options Programs (SHOPs). These state-run marketplace exchanges will work with carriers to pool insurance options, with the hope that costs will be lower for a larger, more powerful, group.
Firms will get a one-stop source to find out about insurance, says Shawn Nowicki, director of public policy at HealthPass, a commercial health insurance exchange.
- By 2018, high-end health plans with premiums of more than $10,200 for an individual policy per individual and $27,500 per family - not including vision and dental - would be subjected to a "Cadillac" tax. (The average cost of a family plan in 2009 was $13,375, with employees on average paying $3,515 and employers paying $9,860, according to the Kaiser Family Foundation.)
The excise tax would be paid by employers that self-insure ( most large firms do) and insurance companies, but small-business experts expect these costs to be passed along to smaller firms via premium increases.
- Unhappy employees don't have to stay in a job they hate for fear of losing health insurance for themselves or their children.
The new mandates say insurers can't deny coverage due to pre-existing conditions (effective this year for kids and in 2014 for adults). Adults can also buy through SHOP exchanges. Also, insurers can vary premiums based only on a person's age, geographic region and use of tobacco, not on health status.
- Within six months of the bill becoming law, the workers can keep kids on their insurance policies until they're 26.
- Also within six months, lifetime caps on employer-sponsored insurance - often $1 million - would be removed.
Yet, "A small employer that goes from a low lifetime maximum to an unlimited maximum could see a substantial increase in premium costs, as much as 10 percent to 20 percent, depending on their history and the rest of the program design," says Osterndorf.
Even though many parts of the overhaul still have to be sorted out, there are plenty of small-business owners who are already against the plan. Among those is Keith Ashmus, partner at Frantz Ward, a law firm in Cleveland. While his company has long-supported health care reform, he says it's against this one because of what he calls "insufficient attention to cost controls."
He says it will increase premiums for 80 of his 110 employees who participate in the company's health care plan. And he particularly doesn't like the "Cadillac" tax on generous health care plans. "It will be a nightmare to calculate," he says.
There are widely different views on how health care reform will affect entrepreneurship.
Steven Berglas says it'll basically kill it. "Entrepreneurs live in a reactive mode," says Berglas, an executive coach in Los Angeles who has written and taught entrepreneurship.
Creating more bureaucratic regulations for entrepreneurial small-business owners, he says, "is like placing a speed-limit sign in front of a Porsche owner."
But Robert Pasick, a clinical psychologist and executive coach from Ann Arbor, Mich., disagrees.
Pasick, 63, and his wife, Patricia, are both self-employed. Between them, they pay more than $1,700 a month for health insurance. A few years ago, he says, that cost was closer to $500 a month.
He doesn't know how much longer they can afford to be self-employed. "Our biggest expense is our health care," he says. "It's bigger than our mortgage."