So What Does Obama Care Mean for Small Business?

Be careful little hands what you do!

Congress last night enacted President Obama’s sweeping healthcare plan, but like many things congress didn’t consider all the details. The idea was to assist small business and individual Americans in purchasing healthcare, what it will end up doing is slow and reduce hiring in the future.

The president’s plan is number driven: business from x amount of employees to y amount of employees pay z much toward healthcare, or if they do not, they are fined w amount. This was a fair idea if American company’s personnel strategy was still to hire employees, but frankly, they missed the boat. Instead of hiring marginal employees, companies will either do without the marginal hire or use temps and/or contractors to do the job. Furthermore, with all of the job quota entanglements (and they still are out there), a business owner will have to consider if he or she is going to break a certain healthcare number threshold. Business owners are going to pay very close attention especially if they are near the 50 employee point and this creates a very discomforting scenario.

Suppose a business is at 49 employees and it needs to hire a transportation manager. Looking through the list of employees, there is the transportation secretary who has been a very good employee, but is a secretary. What should the business owner do? Well, the smart thing (but brutal thing) to do is fire/layoff/RIF the secretary and hire the transportation manger; addition by subtraction is going to be rampant! Who will get hurt? The people the president was most trying to help, average hard working Americans! Of course, the secretary might be advised that she can “contract” her old job back with xyz temporary service. What a crock! Of course, xyz temporary service will also have to consider the numbers game, but that leads to some brutal consequences as well. How long can you be a contractor/temp before you are automatically switched out (again to duck the numbers game)?

Also, just how hard is it to start a company as a separate legal entity? A business owner can start an LLC in about 2 days, and a small corporation, like a chapter S, does not take much longer. Remember each of these legal business entities are totally separate “persons.” Therefore the employee counter starts all over again. So too, cost center accounting has been around for years, and each department bills other departments for the work it does. For example, customer service bills sales for processing its orders. How hard would it be to create separate companies, each one under 10 or 25 employees?

Lastly, some companies are just not going to go through the aggravation of the numbers game, and will move some parts of their company off shore. More jobs lost for more Americans, I seem to be recalling which road that it is that’s paved with good intentions…

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Health Care Reform: 3 Things for Small Businesses to Watch

Republicans and Democrats have had their political disagreements and fights in the past but none have been such a death match as the fight over health care reform. With the battle growing each day, some small business owners are beginning to worry that their priorities will got lost in the chaos.

Todd McCracken, president of the National Small Business Association states that "Congress hasn't approached health care from a small business owner's standpoint." Whatever the outcome, there are three important health care issues to keep an eye on come this fall.

1.) Is hiring one extra employee worth your business having to pay tens of thousands of dollars in federal fines? According to the legislation before the House, if your business has a payroll as low as $250,000 then you are required to pay a 2% tax if they did not provide health insurance. This tax would raise to 8% as payroll grew to $400,000. In early drafts of Senate legislation, firms that have 25 or more employees would be required to insure them all or face a penalty per-employee. However the Senate Committee on Health, Education, Labor and Pensions has amended this problem. The bill now excludes a business' first 25 employees and not only the businesses with 25 employees or less which would have resulted in a $750 fee per worker over. So if you add a 26th man to your work force you will only face one $750 fee instead of 26.

2.) Some people want to see the Government put a limit on the value of tax-deductible insurance. In concordance with the current uncapped system, big businesses are allowed to offer premium insurance tax-free which is a good way for them to recruit and keep employees. If you put a tax on this premium insurance, it may generate the funding required for the health care reform. In addition it may also limit plans which cover unnecessary procedures consequently leveling the playing field for small businesses.

3.) It is no surprise that people who own a small business or are self-employed don't have the bargaining prowess that the corporate giants do. But, if Congress allows entrepreneurs the ability to form insurance purchasing pools, all that could change. A bipartisan group of lawmakers introduced in 2008 and 2009 SHOP, Small Business Health Options Program, which allowed bills such as this.

We can only sit back and wait for the fall to arrive to see how this health care reform unravels. Needless to say the epic battle between the Republicans and Democrats will rage on until then and no matter the outcome, this will definitely be something to keep tabs on as it affects all Americans.