Supreme Court? Health Care Reform? Whatever
Let me please share a few things that have zero impact on my life.
Gays in the military. The Facebook IPO. The Ivy League college admissions process as it relates to my three high school age kids. Lindsay Lohan. Gay marriage. The new Spiderman movie. Roger Clemens. The two gay guys on Modern Family. The NBA finals. Jerry Sandusky. Betty White.
Not that these things (and people) aren't important to some and I respect that. It's just that I don't have to think about them very much. They are of little consequence to me.
Oh, I forgot health care reform. That is also of little consequence to me. Or my business for that matter.
Because very, very soon the Supreme Court will rule on whether all or parts of the Patient Protection and Affordable Care Act of 2010 is constitutional. It'll be big news. But not for me. And not for my small business. Or most of the small business owners I know. Contrary to what many anti-legislation groups are arguing, most small businesses like mine have been blissfully left out of the health care debate. Health care reform doesn't affect most of us, at least not in the short term. And even in the long term its effects are murky at best.
Here's what I mean. There's the tax credit for small business that's part of the legislation. Companies like mine can take a credit against taxes owed based on how much health insurance we're paying. Sounds like a good thing, right? It is a good thing. But for a very select few. That's because to take full advantage of the credit you need to have fewer than 10 full time employees earning an average salary of $25,000 per year. From there it gets reduced. So unless you're employing oompah loompas making everlasting gobstoppers somewhere in Alabama you're going to find yourself disappointed by the actual benefit you receive, if any. Sure, it can add up to a few bucks saved. But for most it's not such a big impact. This would be why only 170,000 small businesses took advantage of the tax credit last year. Remember: that's out of 20 million small businesses.
By the way, these aren't the only tax implications of the bill. Starting in 2013 there's a new "unearned income" tax, an increase in our Medicare tax rate and a decrease in the amount of itemized deductions we're allowed to take against income. This is all to help fund the legislation. Who here thinks, with the government's current deficit problems, that these taxes will be changed or removed regardless of the Supreme Court's decision? Anyone? Bueller?
There's also a lot of yelling and screaming about the act when it comes to "the mandate." Individuals will be required to have health insurance or pay a fine. And the government will require businesses to provide a qualified health insurance plan for their employees or face a penalty of up to $2,000 per year for each. I'm not sure why this upsets them. Most companies pay an average of $9,000 per year per employee for health insurance as it is. So, in a worst-case scenario, a company could ditch its plan and just pay the penalty. Or, as most executives I know are considering, just pay the fine and then come up with a reimbursement for an employee who then buys his insurance on his own so that he's not paying any more than before. For many, the cost would still be about the same, or even less. What does this amount to? It amounts to not much of a difference whether the legislation moves forward or not.
In either case, it definitely doesn't affect my business. That's because I forbid my people from drinking sodas in 32 ounce cups. Oh, and it's also because I employ fewer than fifty people. So therefore my business, like the great majority of those 20 million small businesses, is exempt from the legislation. Nyah! Nyah! We can offer health insurance. Or we can ditch our plans and tell our employees to go fend for themselves. Or meet them somewhere in the middle. We can do all this without fear of paying a penalty. For many of us, the upcoming Supreme Court ruling is about as important as Arsenio Hall returning to late night TV. See? You don't care either. Whether the legislation is blessed by the Supreme Court or not, we will not stop providing health insurance for our employees. And the cost will likely be the same to us too.
And from what I read recently, it's unlikely that many health insurers are going to turn back on some of the coverage they've been required to provide as part of the legislation, even if the Supreme Court strikes it down: "UnitedHealth Group, Humana, Aetna and BlueCross BlueShield of Tennessee all said that they will continue to cover preventive care such as immunizations and screenings without requiring patients to pay a set fee called a co-payment. They also said they'd still cover adult children up to age 26 through their parents' insurance plans."
Let's put aside the obvious fact that this is just too good a PR opportunity for them to pass up and give them credit where credit is due. And although I'm happy that these insurers will continue to provide these benefits for my employees, unless they announce coverage for the treatment of male pattern baldness I'm really not affected by this decision either. Granted, some of the more expensive parts of the coverage, like pre-existing conditions, may likely never see the light of day, which is a shame.
And is any small business owner yet seeing a reduction in her health care premiums? Hello? I thought not. That's because two years into the legislation the cost of health care continues to rise. It's one of those invoices, like the cable bill and the spouse's credit card, that business owners fear opening every month. This has not changed. And most of us don't believe it ever will. This is why so many small business owners are ambivalent about the current health care reform legislation. We have reasons.
And here's the biggest reason: We don't understand the numbers. We don't believe the supporters who say that the legislation will lower the cost of health care over the long term. The crux of the plan assumes that states, with federal assistance, will set up exchanges where individuals and businesses can go to purchase their health insurance. You've heard about this, right? The exchanges will be a level playing field. They will be gloriously competitive marketplaces for insurance providers. All types of insurance options will be available. And insurance companies will need to get the approval from government-appointed committees before raising rates or denying coverage. The economic models rest on the assumption that the 34 million people who are now currently without health care will (under law) be forced to join the market and create a giant new market opportunity for the insurance providers, therefore lowering their costs for all. Makes sense, right?
Not to the business people I know. We wonder how those 34 million are going to pay for health insurance from an exchange when they can't afford to pay it now. Or don't want to. And when this becomes a required mandate in 2014 we wonder how the government is going to enforce the law. Will all, or most of these people enter the market and drive down costs? Really? And will the government be able to go after those who don't without adding thousands of auditors and overhead to an already-unbalanced budget? Hey, are you thinking what I'm thinking? Bring in those oompah loompahs! They'll do the job for almost nothing and sing about it too! Most of us don't believe that costs will go down. The numbers don't exactly add up.
Still, to be sure, many small business owners don't believe in the doomsday predictions either. That's because there are a lot of good things about health care reform that could benefit the economy. The theorists could be right and those 34 million new consumers may drive down costs. It may be more efficient to let a governmental body oversee insurance rates. The state exchanges may be a more effective way to deliver health insurance. Required coverage for things like pre-existing conditions may offer added benefit to employers who can then hire key talent without being restricted by health insurance companies. It's just that like the ingredients contained in those over-the-counter energy drinks: We're drinking it, but we're a little nervous about what's inside.
Here's what we do know: Given all that could happen, it's likely that the same thing will happen whether the Supreme Court weighs in favor of the legislation or not. Costs will likely continue to rise. Gaps in coverage will still exist. Our national deficit will continue to be our national deficit. Our health system will still be far from perfect.
But whatever the case, my small business is really just a bystander to the whole event. So go ahead Justices, rule as you see fit. It's not going to make much of a difference to me. And for what it's worth, the two gay guys on Modern Family are hilarious.
GENE MARKS | Columnist | Owner, Marks Group
Gene Marks is a columnist, author, and small-business owner. He oversees the Marks Group, a 10-person technology consultancy to small and medium-size businesses. A certified public accountant, Marks has also worked in the entrepreneurial services arm of KPMG. He writes for The New York Times, Forbes, and The Huffington Post.