Small Businesses Grapple with New Health Care Law
For small businesses, it may be a case of the best of times and the worst of times. A group long distrustful of government stands to benefit early and often from the health care reform legislation President Barack Obama signed into law on Tuesday. But as 14 states challenges the legislation in court and Republicans make its repeal a 2010 campaign theme, many entrepreneurs are wondering what will come next—and how they will be affected.
The National Federation of Independent Business, a conservative interest group that opposed the Democratic reform bill, estimates that only about 12 percent of small businesses will benefit from the tax credits. Though a sliding scale of credits is designed to help foot the bill, there's a maximum rebate of 50 percent starting in 2014, and the credit disappears after five years.
Moreover, the 50-percent credit is only available to firms with fewer than 10 employees and average annual wages of less than $25,000. The federation's New Jersey chapter has pointed out that the average salary for its 8,000 members is $27,000. The NFIB also claims some 5 million jobs will be lost in five years, a casualty of small business owners forced to choose paying for healthcare over keeping an employee.
"Small-business owners had the highest rise in health insurance costs, and nothing in this legislation is going to change that around," Bill Cron, associate dean of the Neeley School of Business at Texas Christian University, told the Fort Worth Star-Telegram. "I saw nothing that's going to reduce that.
"If there's any good news, implementation is staggered," Cron continued. "A lot will be stretched over the next three-to-five years. I think for the most part, this legislation had to do with the availability of health care and not as much as cost."
Less than half of businesses with between three and nine workers offered health insurance in 2009, according to the nonprofit Kaiser Family Foundation. That figure jumped above 70 percent for companies with 10 to 24 employees and to nearly 90 percent for those with 25 to 49 workers.
Gail Lindley, owner of Denver Bookbinding Company, employs 13 people. Her family has run the book restoration and rebinding firm since 1946.
'When you've been in business a while, you remember the old days,' she told Denver's ABC TV affiliate. 'I remember when health insurance used to be considered a benefit. Now, it's considered an entitlement.'
She's concerned about the bill's mandate that business foot more of the health care bill.
'Why would government add more burden on to you when it's tough enough to stay in business?' she asked.
Other small businesses confessed they weren't sure exactly how the legislation would affect them – not a surprise considering that the 153-page follow-up bill that will iron out some of the reform details is still being debated in the Senate.
Nancy Lurker, CEO of PDI, a New Jersey company that outsources services to the pharmaceutical industry, said she wasn't sure if the bill required extending coverage to the company's stable of 60 part-time employees. (It doesn't technically, but two part-timers count as one full-time employee for purposes of determining whether a business has 50 employees – the threshold at which a company is required to offer a minimum level of coverage or pay a per-employee fine.)
Paying for part-timers' health care would set back the company's plans for hiring.
'It's very murky,' Lurker said. 'If there's uncertainty, you don't hire.'
What are your biggest questions about how healthcare reform will affect your business?
Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.