President Obama says small businesses will be big winners under health care reform, but some entrepreneurs and the organizations that represent them say the only thing big about the new law will be the problems and taxes that come with it.
“It’s going to create huge uncertainty and the potential for another downtick in the economy fed by that uncertainty,” said Keith Ashmus, a partner at Frantz Ward LLP, a law firm in Cleveland. He said the bill will “almost certainly” lead to increased health insurance costs for businesses with more than 50 employees — like his.
“And it’s going to result in a lot of people looking at the structure of their business to see how they can structure themselves to avoid horrendous penalties,” Ashmus told FoxNews.com.
But other groups say the legislation that Obama signed on Tuesday will address key concerns like affordability and accessibility, as well as implement regulations that will prevent annual “double- and triple-digit rate hikes” from insurers.
After the bill was passed in the House on Sunday night, the president said the historic vote was about “every American” dealing with rising premiums amid a sputtering economy.
“It’s about every small business owner forced to choose between insuring employees and staying open for business,” Obama said. “They are why we committed ourselves to this cause.” On Tuesday, when he signed the bill into law, Obama said the tax credits to small businesses will begin this year.
Here are other some effects of the health reform law as it pertains to small firms:
— States, by no later than 2014, must establish Small Business Health Options Programs (SHOPs), which will enable small businesses to pool their resources to buy insurance;
— Until the SHOPs are established, businesses with 10 or fewer full-time employees earning less than $25,000 on average will be eligible for a 35 percent tax credit; firms with up to 25 workers who average up to $50,000 will receive partial credits, while businesses with more than 25 workers will receive no credit;
— Those tax credits will remain steady at up to 50 percent of costs for the first two years any company buys insurance via state exchanges;
— Beginning in 2014, under the reconciliation plan, firms with more than 50 employees must offer health care to employees or pay penalties of up to $2,000 per employee for all but the first 30 workers.
Ashmus, who is chairman of the National Small Business Association (NSBA), which represents more than 150,000 small firms, said the law will force executives to make tough decisions regarding their employees’ health benefits.
“There’s going to be a lot of incentive to drop coverage, even with the penalty,” Ashmus said. “And will we not be getting subsidies because of our size, and we are still in the small-group market because not all of our employees get coverage through us. That will impact us significantly.”
Like other NSBA officials, Ashmus said other shortcomings of the legislation include the sharp and continual rise of small business health premiums and tax increases on both earned and unearned income.
“This bill will place significant new pressures on small businesses to both offer and pay for employee health insurance, starting in the earliest stages of reform,” the National Small Business Association (NSBA) said in a statement. “However, the provider-level reforms that could contain costs and enable small business to afford this commitment will not be fully effective for many years — if at all. We justifiably expect that small companies caught between these twin pressures will see their ability to grow, prosper and create jobs greatly diminish.”
The National Federation of Independent Business, which characterized the health care bill as “devastating” for small business owners, said its members are outraged that members of Congress didn’t vote against what it is calling a “job-killing” bill.
“This isn’t a health care bill, this is a tax bill wrapped up in health care paper,” Susan Eckerly, NFIB’s senior vice president, said in a statement. “For small businesses, health care reform has always been about costs — reducing them. But the only thing this bill does is drive costs even higher. It will raise, not lower, insurance costs and it will increase both taxes and the cost of doing business for the very people they said they wanted to help — small business.”
Come election time, Eckerly said, small business owners will remember who voted against their future.
“And they will make their voices heard when they vote in November,” Eckerly’s statement continued.
NFIB officials say $6.7 billion of new taxes on insurance plans and pharmaceutical companies will ultimately be passed on to customers, including small business owners. They predict family premiums will rise at least $500 and individuals who earn more than $200,000 will be forced to pay higher Medicare payroll taxes and a new 3.8 percent tax on unearned income.
The businesses most likely to see the “unprecedented” increase in Medicare payroll taxes are those with between 20 to 200 employees, or more than 25 percent of the U.S. workforce, according to the NFIB.
And tax credits for small businesses, which will be available for a maximum of five years, won’t bridge that gap, because very few of those firms will actually qualify.
But other small business groups, including the Main Street Alliance, a network of small business coalitions in 15 states, say the status quo regarding health care was intolerable.
“Small businesses have much to gain from health reform,” the group told congressional leaders in a letter. “The final health reform package makes small businesses big winners by ending discrimination, promoting affordability, expanding choice and containing costs.”
Supporters of the legislation like the Main Street Alliance say an estimated 3.6 million small business owners will qualify for tax credits for health care beginning this year and will receive roughly $40 billion in assistance over the next decade. A large percentage of the 26 million small business employees currently uninsured will also receive help.
The Congressional Budget Office has estimated the final package will reduce the federal deficit by $138 billion over the first 10 years and by $1.2 trillion over the second decade. The Main Street Alliance says the legislation contains a “range of innovative” measures to slash costs.
“These include implementing electronic medical records, simplifying paperwork to cut administrative wastes system-wide, and experimenting with ways to reward quality of outcomes over quantity of services,” Main Street’s letter continued.
John Arensmeyer, CEO of Small Business Majority, a nonprofit, nonpartisan small business advocacy group, applauded the legislation and called upon the Senate to pass the House’s reconciliation package.
“Small business owners will be able to join state pools, or exchanges, which will lower their costs and give them the leverage they need when negotiating for coverage,” Arensmeyer said in a statement. “They won’t have to worry about insurers denying them coverage because of their age, health status or a preexisting condition, because insurance reforms will end these unfair practices.”
Arensmeyer’s statement continued, “The bottom line is that the soaring cost of health care will no longer be a monumental obstacle to opening and operating a small business.”
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