Saturday, March 27, 2010

The Cost of Paying for Better Healthcare

A small business with fewer than 50 employees is not required to carry health insurance. Many of those businesses owners will drop their coverage for employees. Other small businesses that have just over the required amount of employees will lay off workers and use temps or farm out to subs. Two part-time workers will be considered as one full-time employee. Companies with over 50 employees will now be considered larger employers.

Many companies will cut hours so employees will fall under part time status (390 hours). This is why 16000 new IRS agents are needed to oversee and enforce the new rules. Employers with 50 or fewer full time employees will be exempt from penalties and it will affect future hiring, leaving workers legally obligated to either buy the government mandated high-premium comprehensive insurance out of their own pockets using after-tax dollars, or pay the new penalty for remaining uninsured.

Employers with more than 200 workers are required to automatically enroll new full-time employees in health-care coverage. Giving large employers as well, more than enough financial motivation to discontinue health coverage as the $2,000 penalty per employee is well below what they are currently paying.

This tax will add significantly to small business expenditures, regardless of whether they choose to offer health benefits to their employees or not. The bill creates a strong deterrent for a business to expand compensation or even acquire new workers. As a business nears a higher payroll bracket, it also risks spending a much higher percentage of its earnings to pay the penalty tax. Any small business owner is going to reconsider before offering bonuses or wage increases to its workers.

Moderate-income self-employed people who can’t afford the high-priced comprehensive health plans and aren’t eligible for subsidies would not only lose their insurance, but would pay a penalty for remaining uninsured.

Employers of non-elderly people working part-time will be exempt from providing them insurance, but the people themselves will not be exempt from the requirement to obtain the government-specific comprehensive insurance on their own. Persons in these categories will be required to either buy the government specified high-premium comprehensive insurance out of their own pockets using after-tax dollars, or pay the penalty for remaining uninsured.

For older working age adults and early retirees aged 45-64, they will be hit with new taxes despite the promise not to raise taxes on households earning less than $250,000 per year. Households headed by individuals aged 45-64 who deduct medical expenses on their 1040 tax form, who ought to be helped by a health care reform bill, would see a tax increase of about $200 on average. The higher the medical expenses faced by these families the higher the tax increase they would face. Kind of like auto insurance, the higher the claim the more you pay.

Low-income families are in danger as bill creates incentives for employers to avoid hiring members of low-income families. The employer mandate would require employers with 50 or more employees to offer insurance to all employees or pay a penalty of $750 per worker. If the employer does offer insurance, they would still pay a fine – but only if they hire workers from low-income families! If the employee’s portion of the cost exceeds 9.8 percent of the employee’s family income, and that employee is eligible to receive a premium subsidy (“affordability credit”), the employer would be slapped with a $3,000 penalty. This is based on family income, so employers would be better off hiring workers with few dependents or with other sources of income, rather than those with a single source of income and several dependents. Employers would be punished for hiring the members of society who need jobs the most.

Businesses that are affected by this tax will react to its outcome, especially during a period of economic downturn. Those who could not afford to offer health benefits or pay the higher tax would look for other ways to outfox the government, effectively by containing or reducing wages, and not hiring additional workforce.

Last month, another 190,000 jobs were lost. With unemployment rate hovering at 10%, this is the opposite course Congress should be sending small business. The Federal job base continues to grow as jobs in the private sector shrink.

Research shows that healthcare would not decrease costs for American families and small businesses. How can it when $729.5 billion of new taxes are imposed on the same small businesses and individuals who are already struggling to afford health coverage?

Hospitals are slated to lose $155 billion in federal funding over the next decade; the bill calls for $132 billion in cuts to Medicare Advantage plans, the private health plans that cover one in five seniors; new taxes on the industry total $70 billion over 10 years, beginning in 2014; nursing homes would see their Medicare reimbursements cut by about $15 billion over the next decade. While Medicare comprises only about 13 percent of nursing home revenue, the industry relies on the money to offset low Medicaid reimbursement.

Citizens and legal residents must have health insurance or pay a penalty. There would be no change in the law that requires emergency rooms to treat people who need emergency care, including undocumented immigrants. There is already a federal grant program that compensates states for emergency room costs associated with treatment of undocumented immigrants, a provision sponsored by a Republican lawmaker.

The American people are being forced to sign on the dotted line and pay for a product they have not yet seen.

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