.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;}
Sarah Grant is usually a pretty upbeat person.

Just don’t get her started on the topic of the recently enacted health-care reform law.

“It’s just of no use to a business with more than 25 employees,” said the owner of Sticks Inc., with an uncharacteristic edge to her voice. “I feel like we’re being punished; it is absolutely no help to us.”

After researching provisions of the legislation, the Des Moines small business owner found that her company doesn’t qualify for the highly touted tax credits that will be available to companies with smaller work forces than Sticks, which employs 140 people. At the same time, she said, it will increase her reporting requirements to the government while doing nothing to address rising health-care costs.

“I think my biggest fear is that I won’t be able to offer the quality of health insurance product I have in the past,” said Grant. She has provided an array of coverage options to her employees since incorporating in 1992, and covered 85 percent of the plans’ costs.

Over that period, “I’ve had more employees complain about the soda machine or parking than they ever have about the benefit packages,” she said. “I’m hopeful we can still provide that array of offerings; we’ll see.”

Still a mystery

Signed into law by President Barack Obama on March 23, the Patient Protection and Affordability Act will impose a number of new requirements on employers, among them a mandate that many businesses must offer health coverage to their employees by Jan. 1, 2014, or face monetary penalties.

The legislation extends an immediate carrot to small businesses, in the form of a tax credit available to companies with 25 or fewer employees and average annual compensation below $50,000. Locally, consultants have mixed views on how relevant that incentive will be for small businesses in Iowa, however.

For many small business owners in Greater Des Moines, the potential costs and benefits of the massive health-reform bill remain a mystery, despite their efforts to unravel its intricacies.

“I really don’t know what it’s going to do,” said Ryan Parlee, a co-owner of PUSH Branding and Design in Urbandale, who said he has tried to keep up with the evolving legislation.

Parlee said his company currently provides “very good” health coverage options as part of its benefits plan, “but I don’t know what that’s going to look like in the future. We’ll always try to be a top provider and find the best services for our company. But it just seems like (small businesses are) going to be the ones with the most to lose.”

As with any new tax legislation, there will be definite winners and losers, said Paul Cain, a managing director with RSM McGladrey Inc. in Des Moines.

“There will be some businesses that have either substantial additional taxes or reduced deductions; there are a whole variety of things that could impact their businesses,” he said. “But there will be other businesses that will have a substantial benefit, such as a tax credit for health insurance they were already offering.”

Overall, it appears the very smallest businesses, those with fewer than 25 employees, are most likely to come out ahead, he said.

“The good news is that because many of the provisions aren’t effective until 2014, businesses will have time to develop strategies to deal with the changes,” he said.

Not dropping coverage

Cain said he believes the small business tax credit will apply to a number of his firm’s clients

“There are going to be a fair amount of companies out there already providing health insurance to their employees, and so it’s a benefit they might already qualify for,” he said. “Certainly I plan to contact all of our clients that appear to qualify to see how much that credit would be and so they have an idea that credit is coming their way.”

In some cases, an employer may want to consider increasing the share of the premium it’s paying to qualify for the tax credit, Cain said.

A second key provision beginning this year is the extension of medical coverage to dependent children on their parents’ policies to age 26. “I think that’s pretty important because there are a lot of college-age students who aren’t getting employment right away when they graduate in May,” Cain said. “They can still be covered (by their parents) even if they do have a job and can generally support themselves, but maybe can’t get health insurance coverage.”

A family-owned business in which the owner’s young son or daughter is working full time may then be able to save some money by putting the family onto one policy, Cain noted, rather than having to have two policies.

Most business owners he has talked with aren’t considering dropping health coverage because of the new law, Cain said.

“Honestly, most of the companies I work with in Iowa aren’t trying to do that,” he said. “I know there’s a concern that employers will drop coverage because the penalties might be less than the cost of providing the insurance, but I really believe that in the long term, employers are going to want to treat employees well and try to provide the coverage.”

More costs

Holmes Murphy & Associates Inc. is finalizing a financial impact model to help its clients determine their costs and benefits under the health-reform bill.

“We will be talking to our groups about what we think the financial impact will be for them,” said Lori Wiederin, a senior vice president at Holmes Murphy. “Every industry is different. Some companies aren’t offering insurance, so the $2,000 fee (per employee penalty for not providing coverage) will be a bigger deal for them.”

Some of the costliest provisions for businesses will likely come from costs that are passed along to companies, Wiederin said. For instance, some studies have estimated that the number of people eligible for Medicaid could increase by 50 percent.

“So hospital providers are going to have to pass those costs along to private consumers,” she said. “And with the whole waiving of pre-existing conditions, there is an individual mandate that people have to buy insurance. But in 2014, the first year that’s effective, the penalty for individuals is only $95 a year. If people wait and don’t buy insurance until they need it, then everybody’s insurance will go up.”

Additionally, the penalties to businesses for not offering coverage are less expensive than the cost of providing insurance, she said. “But for those that aren’t providing coverage now, this is a huge burden to them. And for employers that have a lot of employees working 30 hours (the threshold to be considered full- ime), you may have a lot of businesses cutting them back to 29 hours.”

David Lind, president of David P. Lind & Associates L.C., a benefits consultant in Clive, said that given the narrow criteria to qualify for the small business tax credit, he would be surprised if a large number of Iowa businesses qualify for the break.

Lind, whose firm annually surveys Iowa employers to gauge benefits trends, said it will be very difficult to determine the longer-term impact of the legislation. That’s particularly true for the “play or pay” decision that businesses with more than 50 employees will face in choosing whether to provide coverage.

“On the surface, (no longer offering coverage) might be appealing to some employers, but I don’t know how many of them would be willing to dive into that pool, considering that they’re competing with other employers,” he said.

Frustrated

A 2009 survey conducted by his firm indicated that a vast majority, 81 percent, of respondents opposed mandating that employers provide health insurance for all full-time workers.

Sarah Grant echoed that sentiment.

“I already had positives with my company; I didn’t need the government jumping in,” she said. “I’ve done the right thing since 1992; I’m very sad that that hasn’t been recognized. … I have people who have been here no less than eight years and I think benefits are part of that.”

Parlee said business owners aren’t alone in their frustration.

“I have some clients in the health-care industry also, and they’re pretty frustrated with the whole situation, as I’m sure many people are,” he said. “It’s definitely a major downer coming out of some of those conversations, because pretty clearly to them, it doesn’t address the major issues, particularly responsibility of (controlling) costs by hospitals.”

Overall, employers’ health-care costs will continue to increase, Wiederin said, because the new laws don’t address the causes. “What this bill really does is redistribute costs,” she said. “The people who have insurance, their costs will go up to cover the 30 million additional people who will be insured.”