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Health reform's bottom-line impact unknown

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A month after lawmakers approved a massive national health care reform bill, local business owners are still trying to interpret what it means to their bottom lines.

More patience is going to be needed.

“The way things work in our world is that the law goes into effect, then rules and regulations come into effect and tell us how to do these things,” said Ted Smith, a certified public accountant in Ozark.

Uncertainty about the details in the Patient Protection and Affordable Care Act, signed into law by President Obama on March 23, has some businesses in a holding pattern and others say they are largely unaffected.

“This is still really early in the design phases,” said staff accountant Michael Gahagan at Springfield Sign & Neon Installation & Service. “I know that everyone is anxiously waiting to hear what the regulations are because there are going to be pros and cons for business owners.”

Small business tax credits
While Gahagan said more study is needed, including outside help from CPAs The Whitlock Co. and The Payroll Co., the 25-employee shop may find itself qualifying for federal tax credits to help pay for the insurance it offers.

Starting this year, businesses with fewer than 25 employees meeting certain wage requirements can apply for nonrefundable tax credits to help offset the cost of offering the insurance. Two of the 25 Springfield Sign staffers are company owners, he said.

“Basically, every small business owner is not included in (tax credit) calculation,” Smith said, noting self-employed individuals, shareholders that have a 2 percent or greater share in an S Corporation, and a 5 percent owner of any other eligible small business does not qualify as an employee when it comes to the credits.

“We can get tax credits for the cost of insurance for our employees, but we can’t take credits for the cost of insuring ourselves,” Smith said.

The businesses that can take advantage of the credits have to contribute at least 50 percent of the total premium cost of their employees’ insurance, Smith said. To receive the full credit – 35 percent 2010–13 and 50 percent in 2014 – employees must earn, on average, less than $25,000 a year. For businesses with employees averaging more than $25,000 but less than $50,000 a year, Smith said credits are offered on a sliding scale.

Fines in 2014
Larger employers aren’t eligible for credits, but beginning in 2014, they may be subject to a fine if they don’t offer insurance and one of their employees receives federal assistance to pay for coverage. While no business will be required to offer health insurance to employees, those with 50 or more employees may be subject to penalties for not offering employee coverage.

“The calculation is basically that you add the number of full time employees, subtract 30 and multiply the remainder by $2,000,” Smith said. “It’s not $2,000 for each employee. They’re giving you grace for 30 of your employees.”

Nearly all of Jack Henry & Associates Inc.’s 4,354 employees in Monett and Springfield take advantage of its health care coverage, said Ann Puddister, human resources general manager, who works out of an Allen, Texas, office. About 90 percent of Noble Communications Co.’s 125 employees in its Springfield and Chicago offices take advantage of the coverage, said Keith Acuff, chief operating officer and chief financial officer.

Puddister and Acuff say the coverage their firms currently provide should minimize the effects of the legislation on their companies in the short-term, but they’re more apprehensive about unknowns down the road.

Unknown administrative fees
“There are going to be some administrative record keeping items. Those are part of the regulations that we’re all waiting for,” Acuff said. “I fully expect, come 2014, that there will be a whole raft of paperwork and reporting and testing and filing.”

Large or small, businesses will have to adjust to new reporting requirements. After Dec. 31, for the 2011 tax year, employers must print the costs of employer-sponsored health care coverage on W-2 forms.

For small businesses that have been hit hard by the recession, even the extra hours needed to meet that requirement can be an imposition, said Ross Williams, principal at Ross Williams Architects. Williams said the loss of work during the recession forced him to lay off his employees – at one point, there were as many as seven – and man the firm alone. He’s hoping to rehire three this year, but he’s concerned about the reporting obstacles in the new legislation.

“I’ll have to pay an accountant or spend more time doing paperwork. Right now, I’m spending about 15 percent of my time doing paperwork,” Williams said.

Acuff said he could think of one “slight benefit” that can come out of the W-2 requirement: Employees will see the value of their employer-paid health coverage.

The Cadillac in 2018
In eight years, the health care reform bill has created a 40 percent excise tax on so-called Cadillac plans, or coverage that annually costs more than $10,200 for individuals and $27,500 for families.

Both Puddister and Acuff will be watching for regulations associated with that tax.

“We do have concerns about the Cadillac tax on what we refer to as our high-value plan. But there’s a lot that might happen between now and 2018,” Puddister said.

If Missouri Lieutenant Governor Peter Kinder has his way, the legislation won’t be in effect in 2018. In early April, Kinder announced his plan to bring a privately funded legal challenge against the federal law. On April 21, he announced a partnership with constitutional attorney Thor Hearne of Washington, D.C.-based Arent Fox LLP, to serve as an adviser in the challenge.

Regardless of what happens, Acuff iss confident that business owners will adjust.
“We’ll figure it out and get on with doing our business,” he said.[[In-content Ad]]

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