CITYWIDE — Just over a year after President Barack Obama signed the federal health care overhaul into law, small businesses continue to get mixed signals on whether or not the bill’s provisions will help or hurt them, and many just ignore it altogether.
In its simplest interpretation, the biblically-long bill aims to drive down costs of health care nationwide by ensuring that all Americans purchase health care coverage, or get it provided through their employer.
According to the federal government, small businesses pay 18 percent higher health insurance premiums than large businesses, as well as higher administrative costs because they do not have the same level of bargaining power nor resources to deal with complicated paperwork.
The cost and difficulty cause a lot of small business owners to avoid providing health care to their employees.
To encourage businesses to take the leap, the law includes a tax credit to help small businesses with fewer than 25 full-time employees to cover the premiums.
Calculating the credit involves a complicated formula involving the number of employees, how much the employees earn in a year and what kind of coverage the employee has — family or individual plans.
There are many caveats — the more an employee is paid, the smaller the tax credit for the employer, which already has to shoulder a minimum of half of employee premiums to qualify for the credit at all.
Maximum credit goes to businesses with under 10 employees that pay their workers less than $25,000 a year, which means many professionals don’t qualify.
It doesn’t help that many business owners remain unsure of the law, and doubtful that it could benefit them in any meaningful way.
Evelyn Guerboian, who co-owns Readers Fine Jewelers on the 300 block of Wilshire Boulevard in Santa Monica, hasn’t examined the details of the law because her business doesn’t provide health care to its employees.
What she does know is that providing health insurance is a hefty burden on a small, luxury-item business trying to weather the tumultuous economic climate of the Great Recession.
“It’s just too much of a cost on small business owners,” she said.
According to a survey by the Small Business Majority, a national nonprofit organization that advocates for small business, many business owners are unaware of potential cost-savings built into the law.
The survey found that 57 percent of small businesses didn’t know about the tax credits that they can claim on their 2011 taxes to offset health care costs, and 62 percent haven’t heard of health insurance exchanges, mechanisms that currently do not exist but will eventually allow small businesses to pool their buying power and reduce administrative costs.
“There’s a lot of confusion about the law out there,” said John Arensmeyer, CEO of the Small Business Majority. “Part of it may be because they’re busy, but there’s also a lot of misinformation about it, fear and instilled distrust. It’s difficult for small businesses to understand the details, which is too bad, because the tax credits are happening right now.”
Of small businesses in California, 76.6 percent are eligible for some level of tax credit under the new law, Arensmeyer said.
While the Small Business Majority wishes the tax credits were bigger, at the very least the bill doesn’t hurt small businesses that don’t want to participate in them, Arensmeyer said.
“It’s all positive and no negative. You either take it, or you are where you were before,” he said.
Not so fast, said Bruce Jugan, CEO of Benefitscafe.com, a website that allows businesses to research and enroll in individual and small group health plans.
“The tax credit for small businesses has been set up, but the restrictions are so great and the benefits so small that it doesn’t seem to be a factor in people providing health care to their employees,” Jugan said.
The credit’s requirement of having 10 or fewer employees earning $25,000 prices out many Santa Monica small businesses.
Also, the health care bill puts a great deal of upward pressure on prices because some preventative procedures are promised to be free on top of tax credits, subsidies and the inclusion of higher risk — and more expensive — patients.
“It’s not free,” Jugan said. “There’s no co-pay when you go get these services, but everyone’s getting paid. It’s really going to exacerbate the problem in that patients are going to be shielded from the costs because they’re being promised really rich benefits.”
Some insurance companies are already reacting to the law. Blue Shield of California Life & Health Insurance Company announced plans to increase rates by 16.4 percent, which it rescinded in March under heavy pressure from California Insurance Commissioner Dave Jones.
Steven Pinsky, CEO of Babette, a woman’s clothing manufacturer and retailer with a store in Santa Monica, said that insurance costs to cover his workers have gone up as much as 35 percent in some states.
Although he can’t tie those increases directly to the passage of the health care law, he suspects that the bill — and the fact that for-profit institutions are at the heart of it — contributed to the increases.
The company pays $300,000 a year for insurance to cover its 80 employees, which puts it well out of range of the credits meant to help small businesses.
“The way the law reads now, it would behoove us, in a backwards way of thinking, to give up health care and pay a penalty to let our people go into the private pools,” Pinsky said. “It’s a stupid way of thinking, to my mind.”
ashley@www.smdp.com
