Last week I did something that made me very, very guilty. No, I didn't cheat on my wife. I didn't lie or steal from my clients. Here's what I did: I stopped at McDonalds and had a Big Mac.
Big Macs are delicious. I can spend $200 on a fancy dinner and still be just as happy with a $4 Big Mac. You know I'm right. I'm not sure why I love Big Macs so much. Maybe it's comfort food. Or maybe it's the combination of microwaved meat, wilted lettuce and a toasted bun. Or maybe it's just that "special" sauce (and no, I don't want to know what's in it.) But I love Big Macs. Unfortunately, every time I have one I feel guilty. You know they're not healthy. You know they have about 8,000 calories (especially when you combine them with McDonalds' fries, which you must do.) Big Macs are great. And terrible. Eating one naturally makes me think of my health.
Next week, the Supreme Court hears arguments as to whether the Patient Protection and Affordable Care Act, otherwise known as healthcare reform, otherwise known as ObamaCare, otherwise known as "that socialist action" is constitutional. They're expected to issue their ruling in June. For small businesses, healthcare reform is a great and terrible thing. Healthcare reform, like a Big Mac, brings with it immediate and delicious benefits to the small business owner.
For starters, if you have less than fifty employees (like I do) than you're exempt from the law. You don't have to do anything. You can have a health insurance plan. Or you don't have to have a health insurance plan. It's completely up to you. There's no penalty. So many small businesses don't have to fear "ObamaCare" at all. We have options. Hey, that doesn't sound so bad, right?
And what if you have more than fifty employees? Well, you're required to have a health insurance plan. If you don't than you have to eventually pay a fine/fee/penalty ... tax of $2,000 per employee. That sounds like a lot. But it's actually not as much as you think. When you dig down in the calculation, you'll see that the first 30 employees are exempt from the tax. And then when you compare the tax to what you're probably now paying for health insurance (which averages between $8,000-$11,000 per employee according to some studies), you may find that not carrying insurance and just paying the tax is way less expensive than carrying the insurance. Many small business owners will look at these numbers and decide not to carry any health insurance at all.
Not carry any health insurance because it's just so much cheaper? Kind of makes a business owner feel a little guilty doesn't it? It's the Big Mac effect. And the benefits of healthcare reform for small businesses do not end there.
With the legislation, there's also a small business tax credit. So if you employ less than 25 people, and your average wages are less than $50,000, you may be able to get up to 50% of what you pay in health insurance currently back on your taxes. Don't get too excited though - the maximum tax credit is only available to those who have less than 10 employees and whose average annual wages are less than $25,000. Anyone have a payroll like that? Other than Willy Wonka I don't know many people who employ Oompa Loompas. Even so, some business owners I know are guiltily of taking advantage of this tax credit and sticking this newfound money in their pocket.
C'mon, you don't eat just one Big Mac at a sitting do you? If you're at McDonalds, you might as well as go for the gusto. If I can't stuff down another Big Mac, I'll still buy just a single cheeseburger as my dessert. Why are those little McDonalds cheeseburgers so delicious? It must be the special flavoring they put in the microwave. The Patient Protection and Affordable Care Act also comes with a few desserts for small business owners too. And more reasons for us to feel guilty.
Like lower administration costs. With the new legislation, we now have the option of not carrying healthcare insurance at all and sending our employees to one of those state exchanges that are promised to pop up by 2014. This means that our office manager can find something else to do with the 87 hours she spends a week filling out paperwork and submitting claims like she's doing with our existing health insurance plan. Or if we do decide to carry health insurance for our people we can also buy our insurance from those same exchanges. We're promised the lowest rates. No more bargaining and comparing. And the insurance we buy from the state exchange is still applicable for that tax credit.
Because we're promised lower insurance rates and a state-run competitive exchange of products we may also find ourselves avoiding that annual anxiety attack when we're told how much our rates are going up that year. Theoretically, health insurance, previous subject to 15-20% annual increases, should now be more under control and easier to budget. At least that's what we're told. And that's another great thing for small businesses.
Did I mention that, because of healthcare reform, we now have the opportunity to hire better people too? The new legislation enacted rules that disallow insurance companies from denying coverage for those with pre-existing conditions and for people with dependents up to the age of 26. So that prospective marketing expert or engineer that we wanted to hire but couldn't in the past because she (or a family member) had a condition that wouldn't be covered by our insurance policy is now able to move to our company without losing coverage. Thanks to this legislation, we now have more choices.
Big Macs are yummy aren't they? Until about thirty minutes after we leave McDonalds. Because we all know what happens then: A little queasiness and the lingering aftertaste, followed by a belch of that "special sauce." And then there's the nausea we feel a few days later when we get on the bathroom scale and see how much weight we gained. We love how good a Big Mac tastes. But we're not so crazy about its long term effects.
Same goes for healthcare reform. And that's what brings me to the terrible part. Because like we don't really understand why a Big Mac tastes so delicious, none of us really understands how this legislation is going to bring down the cost of healthcare insurance.
We're told that 34 million uninsured people will be entering the market because they'll be required to buy health insurance. But we're not sure why these people will buy the insurance in 2014 if they're not buying it now. Will all these new "customers" really bring down the cost? We're told there will be mandates and penalties if we don't buy insurance but we don't understand how these mandates can possibly be enforced. Won't this be really expensive? We see the government spending hundreds of millions to help states set up their exchanges but we're not sure how these exchanges will ultimately lower the cost of healthcare. We read that there will be special committees of the government to review those special cases regarding coverage but we're not sure how this will lower the costs. Opponents of the legislation now claim healthcare reform will cost more than originally thought while supporters say it will actually cost less (but cover fewer people). We are confused. We are concerned.
No one is going to deny that a Big Mac is delicious. But deep down inside we all know the long term effects. Eaten in moderation, there should be no problem. It's a guilty pleasure. For small businesses, healthcare reform is like eating a Big Mac. Many of us are enjoying the pleasure now. But we're feeling very guilty about the long term effects. That is why for most small business owners, healthcare reform is great ... and terrible.