Tuesday, August 24, 2010

How a Small Employer Preps for Health-Care Reform

Another over-40 softball season has concluded. My team performed as expected: We were 3-15. I'm feeling every inning of those 15 losses. My hamstrings ache and my knees are throbbing. I have a bruise on my right hand from when I fell trying to catch a routine pop fly. I'm going to the bathroom a lot more in the middle of the night, but I don't think that's softball-related.

That's right: My body's going to hell just as the new health-care reform law is starting to take effect. Great timing. I'm not sure its provisions are going to help my sore back any time soon. They're definitely going to affect my small business—and many others like mine—right away. Fellow business owners and over-40 softball players, are we ready?

We'd better be—for more bureaucracy. Think it's fun filling out W-2 forms at the end of each year? Good, because starting in 2011, employers will need to begin reporting the health care benefits received by each employee on their W-2. What? You say you're not tracking that information? We'd all better start. We'll need to make sure our health insurance providers are furnishing us with the right data. Or we'll need to track it ourselves. The data we supply better be right because it's our responsibility to make sure the numbers we're reporting are accurate.

Did I mention my back is sore? That's from all the times I've bent over to watch ground balls skitter between my legs. Now things are going to get worse because I'm going to spend a lot more time hunched over my desk, filling out 1099s. You know what those are—the forms we're supposed to use to report the amount of money over $600 that we paid to independent contractors and self-employed individuals in a given year. Beginning in 2012 we'll still be required to send a 1099 to those guys —along with everyone else who received more than $600 from our companies during the year. They'll be sending us 1099s, too. Oh, my aching back. I don't know the Employer Identification Number or social security number of every vendor in my system. Do you? Better start calling them. Don't have the resources to generate hundreds of 1099s every year? Get ready to break your back writing more checks—to your accountant.

Wait a second. Is filling out more 1099s going to help our health-care system? No more than those shin guards our catcher insists on wearing, even though we play slow pitch. It's all just part of the game.

To play this game, I'm going to make it a point to have a heart-to-heart meeting with my insurance company. That's because I'm expecting yet another significant rate increase as the regulatory demands on the insurance industry grow. If your business were facing an economic downturn, significant uncertainty in your sector, and a government readying to unleash heavy fines on your business just because you have the audacity to earn a lot of money, wouldn't you be grabbing as much cash as you can, while you can? Exactly.

The health-care reform law is requiring health insurance companies to step it up this year. The law says they must now provide coverage for dependants up to the age of 26. They must provide coverage for people with preexisting conditions, such as an inability to hit a slow-pitch softball from a retired dentist. So I'm damned well going to make sure my health insurance company is living up to its end of the bargain and offering these additional coverages to my existing and potential employees. These benefits may not only help me keep my good people on staff, but offer potential employees an incentive to leave their employers and join me. Maybe I can recruit a couple of guys who can catch a softball. If my insurance company complains, I may just report them to my state—the new law provides funding to certain states to investigate excessive premiums.

I'm going to have a heart-to-heart with my accountant, too. Not because his base running is atrocious and his fielding stinks, but because the law offers some potential tax incentives for my business.

For example, companies with fewer than 26 employees and average annual wages of less than $50,000 can now claim a tax credit of up to 35 percent of the cost of premiums. The credit is slated to increase to 50 percent in 2014. The benefits of this tax credit, of course, will be offset by the fees triggered by my accountant's struggle to calculate them and determine how much and when the credit begins to phase out under the law's obtuse provisions. I'll take what I can get.

I'll also look for a wellness grant. The law gave the Health & Human Services Dept. $200 million and the authority to award workplace wellness to companies employing fewer than 100 people. To be eligible, I should have no existing wellness program in place. I'd have to meet certain "health awareness" criteria. (Reminder to self: Remove beer from company fridge.) I'll need to get my employees involved and "provide initiatives to change unhealthy behaviors and lifestyles," such as throwing tantrums on the softball field every time our center fielder drops a fly ball.

Finally, I need to start thinking about 2014, when our best player will be retiring to an over-55 community in Boca. Oh, and that's also the year when everyone's going to be required to have health insurance, either on their own or through employers. That's the year when those mysterious insurance exchanges will be set up to offer less-expensive coverage for both individuals and small employers. Will I continue to pay and provide health insurance for my employees? Or will I scrap the whole thing, tell my people to get the coverage on their own, and pay the $2,000-per-employee annual penalty. What makes more sense for my bottom line? For my employees? For my company's competitiveness?

This is not a decision I plan on putting off till 2013. I need to choose a direction soon. I'll need to discuss it with my employees and make sure to help them with the transition. I can't just yank their health-care coverage on the last day of 2012. I have to give my people time to adjust if I want to keep them happy. Maybe these reforms can provide so much extra coverage that I can start taking steroids—pretty much the only way I'll ever hit one out of the infield.

Gene Marks, CPA, is the owner of the Marks Group, which sells customer relationship, service, and financial management tools to small and midsize businesses. Marks is the author of four best-selling small business books and writes the popular "Penny Pincher's Almanac" syndicated column. He frequently speaks to business groups on penny-pinching topics. More penny-pinching advice from Marks can be found at www.quickerbetterwiser.com.

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