Tuesday, July 14, 2009


I see that you were on a round table on health care reform. I own a small business and I am concerned about being able to afford any additional expenses. Don’t they know in Washington that these are tough times? Can you tell me what is happening in Washington?


Wanda, there are several proposals going on in Washington. The plan seems to be changing daily. President Obama wanted this passed by August 8th but the latest is that there are too many unanswered questions. I just sent out an email warning people that the government wants to take away some of our tax benefits to fund health care reform. In my opinion, if you make more of your hard-earned money subject to tax this is just a tax increase.

Here is what I know. Unfortunately, they are using the tax code as an enforcement tool, not just to raise money to offset the costs of reform. “Play or pay” is the plan that is most talked about. People would have to buy basic coverage and employers offer insurance or face a big fee. Both the House and Senate agree that is the way to make a requirement for universal coverage stick.

Many people are in opposition to this approach so there are battles ahead on the details. The biggest fight involves employer penalties.

House Democrats would threaten firms with an excise tax…8% of payroll if they fail to fund 65% of the insurance premium for an employee’s family coverage and 72.5% for singles. Smalls companies with payrolls of less than $250,000 would be exempt for the time being.

Even though small companies would be exempt, it is going to put them at a competitive disadvantage in attempting to hire and keep good employees.

Senate health lawmakers lean toward a different approach. They would impose a flat fee of $750 a year per full-time employee and $375 for each part-time worker from firms that don’t pay at least 60% of worker premiums for basic coverage. The requirement wouldn’t apply to small companies with fewer than 25 employees.

A third competing plan from Senate tax writers would give firms a pass if enough of their workers were able to buy insurance in the open market and didn’t take government sponsored coverage.

We will just have to wait and see what happens. Hopefully they are not so hung up on getting this passed by August 8th that they at least read the bill. It appears that the key is getting businesses to accept a mandate. If companies that are paying high health insurance believe health care reform will yield significant cost savings, they will go along with the plan.

But lawmakers will walk a tightrope trying to get the penalty just right. Set it too high and business support will evaporate. A penalty that is set too low could prompt many companies to pay it and ditch the hassle of insuring employees. That could leave the government stuck covering a slew of newly uninsured workers. If this were the case, we would have socialized medicine.

As someone recently said, “we will have our health care with the attitude of the IRS and the efficiency of the post office.”

Larry Kopsa CPA