Obamacare a cause of concern for small businesses
Maui Chamber of Commerce members are sharing how the Affordable Care Act – aka Obamacare – will cost them more and hurt their business, and three issues keep coming up.
A small business with four full-time employees well illustrates exponentially rising rates. It was paying $330 per month per employee with its company plan ($1,320 per month). However, the new age-based rates will bring its rate to $1,969 per month given the following employee rates:.
* 28-year-old, down to $272; savings of $58.
* 36-year-old, down to $305; savings of $25.
* 62-year-old, up to $687; increase of $357.
* 63-year-old, up to $705; increase of $375.
Total overall increase: $649 per month.
That means $649 per month is not available for employee raises or benefits, additional help, business expansion or growth, etc., creating another hardship for small businesses at a time when other costs are going up and profits may not have seen an equivalent jump. Unfortunately, this company is not alone.
And, while it is not an issue for this company, there is another factor that is a problem for other companies – smoking.
The Affordable Care Act allows insurance companies to charge up to 50 percent more in monthly premiums for smokers over those for nonsmokers (although reports indicate the average additional cost is approximately 20 percent), adding another wrinkle for companies with workers who smoke.
Numerous businesses, particularly those with older employees who have worked for their company for a long time, are watching health care premiums soar and asking why premiums are now based on age. They do not understand how the connection between age-based premiums and age discrimination was missed and feel it again illustrates that government does not understand the challenges businesses face. While businesses know that age discrimination is illegal, the higher rates will force some to take unwanted actions purely to survive, particularly in Hawaii where the portion the employee pays for health coverage is so low.
What Small Business Tax Credit Benefits?
The Small Business Tax Credit is widely publicized to ease the pain of this new program. Come Jan. 1, businesses with fewer than 25 full-time employees/equivalents (FTEs) may qualify for tax credits up to 50 percent of health care premiums. Sounds fabulous, doesn’t it? But wait, there is more and many say the benefits are a farce.
If you have fewer than 25 FTEs (after adding in part-time workers and doing the hourly calculations), the next step is to look at the average annual wages (calculated by taking your total annual wages and dividing by the number of FTEs). It must be under $50,000 to qualify for the credit. If not, stop here. If so, continue on, but you will quickly learn that you are penalized for paying higher wages. Your tax credit decreases with a higher average annual wage, despite what you are paying for health care.
Next, you must pay 50 percent of the insurance premiums for your employees at the single coverage rate, which should not be a problem for Hawaii employers.
Then, you may be able to claim the Small Business Health Care Tax Credit. Learn more at IRS.gov.
Many who have gone through the process report that even if they qualify, the benefit is so small it is not worth the paperwork.
Help us report the effect of Obamacare on small businesses. Please email your story to email@example.com.
* Pamela Tumpap is president of the Maui Chamber of Commerce.