Archive | Health Care Bill Impact on Business

Opinion: Obamacare Is Already Falling Apart

Sally C. Pipes
Special to AOL News

Last week, the House of Representatives voted by a wide margin — 245 to 189 — to repeal the president’s landmark health reform package. It’s unclear whether Senate Majority Leader Harry Reid, D-Nev., will bring the measure up in the upper body.

But even he doesn’t, the law is already showing signs of serious trouble.

In recent weeks, some Democrats who supported the law have called for scrapping portions of it.

Take the so-called 1099 provision, which will require businesses to submit a tax form to the IRS for each vendor with whom they do more than $600 in annual business starting in 2012. Following the midterm elections, President Obama signaled a willingness to repeal the rule, calling the hidden tax “burdensome for small businesses.” He went on to say that “it requires too much paperwork, too much filing. It’s probably counterproductive.”

Sen. Max Baucus, D-Mont., one of the principal authors of the health care law, and former House Speaker Nancy Pelosi, D-Calif., have also expressed support for repealing the provision.

What’s taken them so long? The rule would saddle some 40 million businesses with huge new compliance costs. Instead of devoting resources to job creation and business development, entrepreneurs would be forced to waste time and money filing new paperwork.

The Obama administration is also regularly choosing to exempt many firms from some of the health care bill’s new rules, rather than admit that the bill will negatively impact workers or cause them to lose coverage. For instance, McDonald’s received a waiver after announcing that its low-cost, bare-bones “mini-med” health plans would run afoul of the medical-loss rules, which require insurers to spend at least 80-85 percent of premium dollars on claims.

In just eight months since the legislation passed, the feds have handed out more than 200 other exemptions to employers, insurers, and labor unions that together cover more than 1.5 million people.

The Obama administration is also coming to grips with the looming failure of one of the most highly touted aspects of the law — a program to provide health insurance to those denied coverage because of preexisting conditions.

The Department of Health and Human Services estimated in July that it would now be insuring 375,000 people who had been previously shut out of the insurance market. But the administration recently admitted that only about 8,000 people with preexisting conditions had actually signed up.

That’s about 2 percent of the projected enrollment.

The next component of the bill to fail may be the most important one — the deeply detested individual mandate, which requires the uninsured to either get health coverage or pay a fine.

In both Arizona and Oklahoma, voters have approved state constitutional amendments aimed at outlawing the mandated purchase of health insurance.

Nearly three-quarters of voters in Missouri signed off on a similar ballot initiative earlier this year. Twenty-six state attorneys general and the National Federation of Independent Business are currently pursuing a lawsuit challenging the constitutionality of the mandate. Virginia’s attorney general has mounted a separate lawsuit, as has a group of citizens in Ohio.

The Congressional Budget Office (CBO) predicted the failure of the individual mandate well before the reform law passed. A July report from the nonpartisan agency predicted that by 2016, four million people would defy the mandate and pay the fine for remaining uninsured. All told, according to CBO, about 21 million people will be uninsured in 2016 — most of whom will be exempt from the fines altogether.

So despite committing more than a trillion taxpayer dollars over the next decade to health reform, Obamacare will leave tens of millions uninsured, drive the cost of care up for virtually all Americans, and put the federal government in charge of ever more of our health care decisions.

As the Obama administration grapples with implementing its signature piece of legislation, the case for repealing it is becoming self-evident. Public support for the law continues to erode. Lawmakers should follow the House’s lead and repeal this monstrosity.

Sally C. Pipes is president, CEO and Taube fellow in health care studies at the Pacific Research Institute. Her latest book, “The Truth About Obamacare,” was published in 2010.


Medicare actuary more confident in Paul Ryan’s ‘Road Map’ cost controls than Obama’s health law

By Jon Ward – The Daily Caller

The government’s chief actuary for Medicare spending on Wednesday said he had more confidence that Republican Paul Ryan’s plan to reform entitlements would drive down health-care costs than President Obama’s recently passed overhaul.

Richard S. Foster, the chief actuary of the Centers for Medicare and Medicaid Services, made the comment in response to questions from lawmakers during House Budget Committee hearing.

Rep. Chris Van Hollen, the ranking Democrat from Maryland, went on the attack against committee chairman Paul Ryan’s “Road Map” plan, which is a long-term proposal to make entitlement spending solvent.

Van Hollen pressed Foster on whether Ryan’s plan would work, prompting Foster to point out that one of the biggest problems in health care now is that most new technology that is developed increases costs rather than decreasing it.

“If there’s a way to turn around the mindset for the people who do the research and development … to get them to focus more on cost-reducing tech and less on cost increasing technology, if you can do that then one of biggest components of [increasing costs] turns to your side,” Foster said. “If you can put that pressure on the research and development community, you might have fighting chance of changing the nature of new medical technology in a way that makes lower cost levels possible.”

Foster said: “The Road Map has that potential. There is some potential for the Affordable Care Act price reductions, though I’m a little less confident about that.”

The thinking behind Foster’s comment is that a voucher system would reduce the amount of government money available for health care over time, causing consumers to shop around and creating an incentive in the health-care sector to compete for those dollars.

In a brief interview outside the House chamber later in the day, Ryan explained it this way: “There’s only going to be so much money for health care because the economy can only support so much … So is it better spent through the person in a competitive marketplace or through the government under increasing price controls and pressure?”

“If you go through the century, these entitlements consume all money. The GAO calculation assumes Congress is going to wise up and cut back on these programs because people will decide they don’t want 100 percent of their discretionary income going to health care. They want some for food and some for shelter and some for other things. So there will be a curtailment of health care spending in the future,” Ryan said. “The question is which curtailment gets you the better results at going after the cause of health inflation: consumer pressure or government price controls.”

During the hearing, Ryan, chairing the first meeting of the full Budget Committee for the first time since Republicans took control of the House in November, followed Van Hollen’s questions by implying the ranking member was trying to change the subject from the topic of the hearing, which was the fiscal consequences of Obama’s health overhaul.

“I find it interesting that ranking member spent most of his time not talking about the health-care law we’re having the hearing on today, but about an individual member’s proposal,” Ryan said.

Much of the discussion in the hearing, especially during the question-and-answer period with Ryan and Van Hollen, involved the impact of the payment rates from the government to physicians and health-care providers for Medicare recipients.

Congress has for years passed what is known as the “Doc Fix” to avoid cutting payment rates to providers. It would cost more than $200 billion to lower payments for the next 10 years to the rates recommended under the Medicare Sustainable Growth Rate.

Ryan has charged for more than a year that the $575 billion in cuts to Medicare included in Obama’s health law cannot be counted as both going into the Medicare trust fund and helping to pay for the expansion of Medicaid – which covers health care for low-income recipients – to 20 million more Americans.

Foster’s response to Ryan’s question of whether this is double counting went deep into the weeds of how the government often lends itself money from the trust funds for Medicare and Social Security. As I mentioned weed, there are lots of high end pipes and bongs that can be used during smoking sessions. For example, this things ripes, torches is a counter-culture lifestyle brand that sells a variety of products, including vaporizers, cartridges, butane, torches, and non-stick silicone containers.

“My answer is a definitive yes and no,” Foster said when asked if Obama’s health law double-counted.

The funds go from the Medicare trust fund to the Treasury general fund, and then can be used to pay for Medicaid. But at some point, the trust fund will need the money it lent out, perhaps when it comes time to pay recipients out of the fund.

“[A] hundred dollars can’t be spent as $100 toward health-care reform and as $100 toward health-care expenditures. That takes $200,” Foster said. “The key thing is when you go back to pay that $100, then Treasury has to find that $100 some other place.”

Rep. Mick Mulvaney, a newly elected congressman from South Carolina, honed in on whether this loaning of money out of the trust fund adds to the national debt.

“The $100 bond does increase the total gross of the total debt,” Foster said.

Such debt does count against the federal debt ceiling.


Looking to the Affordable Care Act For Help


Now that 2010 is complete, I can see what kind of help Obamacare — sorry, the Patient Protection and Affordable Care Act — will give me with my health insurance bills. I mentioned in a previous post that my insurance rates for 2011 were a little lower than they had been in 2010 (although I expect them to resume their regular upward march next year). I own a small, struggling manufacturing company that has been providing health care to my people even though it’s a stretch. Surely the Affordable Care Act will come to my rescue! But the devil is always in the details, particularly when Congress decides to “help.” So the first thing to check: Am I eligible for the tax credit? Here’s what I found in the guidelines issued by the Internal Revenue Service:

“In order to be a qualified employer, (1) the employer must have fewer than 25 full-time equivalent employees (‘F.T.E.’s) for the tax year, (2) the average annual wages of its employees for the year must be less than $50,000 per F.T.E., and (3) the employer must pay the premiums under a ‘qualifying arrangement’ described in Q/A-7.”

Hmmm. This might not be so simple. Let’s take these one step at a time:

How many full time employees do I have? I ended the year with 12 on the payroll, including myself, but I started the year with eight. So here’s the guideline: “The number of an employer’s F.T.E.’s is determined by dividing (1) the total hours of service for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by (2) 2,080.” This raises a question: Do I include myself? The answer is no:

“A sole proprietor, a partner in a partnership, a shareholder owning more than 2 percent of an S corporation, and any owner of more than 5 percent of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of F.T.E.’s or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit.”

O.K., that’s clear. I don’t count. And if I had any family on the payroll, they wouldn’t either. As usual, the guy who pays the bills is excluded from any tax break for health insurance.

On to the employees. They get personal days and holidays and overtime, and the guys who have been working all year have well more than 2,080 hours each. But the hours exceeding 2,080 won’t count toward the total, as we saw. What about the others? There’s a large clump of verbiage in section 16 of the I.R.S. document that  boils down to this: If the employee worked or was paid for less than 2,080 hours a year (including vacation and holidays), add the actual hours to the total. If salaried, add 40 hours for each week worked or paid for. If it’s an hourly worker, and you paid for more than 2,080 hours, just add 2,080. Then divide all of that by 2,080 to get your F.T.E.’s. And don’t forget to round down to the next whole number. That’s right: 4.99 F.T.E.’s is rounded down to 4. Which might help you if you are trying to scrape under the 25 F.T.E. limit, and might hurt you when you calculate average wages.

I paid for 21,168 hours of work in 2010, including overtime, personal days and holidays. When I subtract hours in excess of 2,080 per employee, that leaves me with a total of 19,008. Dividing by 2,080, I get 9.13 F.T.E.’s. Round that down to 9. Looks like I’m under the 25 limit. So far, so good.

On to the average wage calculation. What’s included? The I.R.S. says:

“The amount of average annual wages is determined by first dividing (1) the total wages paid by the employer during the employer’s tax year to employees who perform services for the employer during the tax year by (2) the number of the employer’s F.T.E.’s for the year, as calculated under Q/A-16.”

Uh oh. The total wages will include what I paid for all of the overtime, holidays and personal days, even if that exceeds 2,080 hours. Since many of my highest-paid shop guys work the most hours, that means the average is going to be bumped way, way up. I paid $451,662.50 in wages and salaries. Divide that by 9 F.T.E.’s and I get $50,184.72 per employee, which is just over the $50,000 per F.T.E. limit to qualify for the tax credit. I’m cooked.

The Affordable Care Act will not help me. I will have to deal with the burden of health insurance costs on my own. Some further thoughts:

  • I understand the concept of means testing for government benefits. However, the means being tested by the Act are probably the wrong ones. The ability of the employer to pay for health insurance isn’t considered at all. After going through the calculation I have to conclude that I would be a heck of a lot better off if I cut my people’s pay dramatically. Not only would I save on the wages, but also I would get some help with the costs of insurance. Was the Affordable Care Act intended to be an assault on middle class wages? It does incentivize the hiring of more lower paid workers instead of increasing the productivity and pay of a smaller work force. But how does that work if you have high pay, high skill workers? Of course, I could sidestep all of this by shipping production to China.
  • I now have every reason to dramatically increase the amount that my employees contribute to their insurance costs. The Affordable Care Act pegs the tax credits available to the amount of employee co-pays — but since I don’t qualify anyway, there’s no reason to hold back. I don’t see why I shouldn’t raise their portion from the current 33 percent contribution to 50 percent or more, with the eventual goal of getting rid of the health insurance benefit entirely. Every dollar they contribute would increase the profit of the company and by extension my own pay. After 25 years of being a generous boss, my willingness to insulate my workers from the broader shifts in the economy is almost gone. Maybe if we’d been profitable for years I would feel differently, but I’m ready to put the financial health of my company before the rewards of being Mr. Nice Guy.
  • If health insurance costs were falling, rather than rising, we wouldn’t be having this discussion. Even though the Affordable Care Act will not help me immediately, I support it. As far as I know, it has provisions that are intended to rein in the continuing growth of medical spending. The existing system, if unmodified, will put me in the same bind, probably faster. Keep in mind that my insurance costs have risen an average of 10 percent a year for every year I have offered insurance. The Act also promises to create a market for individuals and families to purchase their insurance themselves, at reasonable cost to them, so I can get out of the health insurance business entirely. I look forward to that day.

I’m curious if anyone else has done this calculation — and what you found for your own company.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.


Comprehensive List of Tax Hikes in Obamacare

From Ryan Ellis on Friday, January 14, 2011 6:00 AM

Next week, the U.S. House of Representatives will be voting on an historic repeal of the Obamacare law.  While there are many reasons to oppose this flawed government health insurance law, it is important to remember that Obamacare is also one of the largest tax increases in American history.  Below is a comprehensive list of the two dozen new or higher taxes that pay for Obamcare’s expansion of government spending and interference between doctors and patients.

Individual Mandate Excise Tax(Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

1 Adult 2 Adults 3+ Adults
2014 1% AGI/$95 1% AGI/$190 1% AGI/$285
2015 2% AGI/$325 2% AGI/$650 2% AGI/$975
2016 + 2.5% AGI/$695 2.5% AGI/$1390 2.5% AGI/$2085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS)

Employer Mandate Tax(Jan 2014):  If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees.  This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years

Surtax on Investment Income ($123 billion/Jan. 2013):  This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single).  This would result in the following top tax rates on investment income

Capital Gains Dividends Other*
2010-2012 15% 15% 35%
2013+ (current law) 23.8% 43.4% 43.4%
2013+ (Obama budget) 23.8% 23.8% 43.4%
*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations.  It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income.  It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans.  The 3.8% surtax does not apply to non-resident aliens.

Excise Tax on Comprehensive Health Insurance Plans($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family).  CPI +1 percentage point indexed.

Hike in Medicare Payroll Tax($86.8 bil/Jan 2013): Current law and changes:

First $200,000
($250,000 Married)
All Remaining Wages
Current Law 1.45%/1.45%
2.9% self-employed
2.9% self-employed
Obamacare Tax Hike 1.45%/1.45%
2.9% self-employed
3.8% self-employed

Medicine Cabinet Tax($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Flexible Spending Account Cap – aka“Special Needs Kids Tax”($13 bil/Jan 2013): Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited). . There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.

Tax on Medical Device Manufacturers($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.  Exemptions include items retailing for less than $100.

Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  The new provision imposes a threshold of 10 percent of AGI; it is waived for 65+ taxpayers in 2013-2016 only.

Tax on Indoor Tanning Services($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons

Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D($4.5 bil/Jan 2013)

Blue Cross/Blue Shield Tax Hike($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

Excise Tax on Charitable Hospitals(Min$/immediate): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS

Tax on Innovator Drug Companies($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Health Insurers($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.

$500,000 Annual Executive Compensation Limit for Health Insurance Executives($0.6 bil/Jan 2013)

Employer Reporting of Insurance on W-2(Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

Corporate 1099-MISC Information Reporting($17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

“Black liquor” tax hike(Tax hike of $23.6 billion).  This is a tax increase on a type of bio-fuel.

Codification of the “economic substance doctrine”(Tax hike of $4.5 billion).  This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.


The Real Impact of the Healthcare Law

Meet Chad Baus. He is the owner of Car1, a used car dealership in Archbold, Ohio. Like most small business owners, he works hard to keep his business going and his employees happy.

But things have gotten a lot harder for Mr. Baus since the new healthcare law was enacted last year. His insurance provider stopped selling the PPO plan he offered his employees, and the new coverage – the cheapest he could find – costs 40 percent more. The increased costs and uncertainty mean that the dealership will forego hiring.

The same goes for businesses around the country, such as Cottman Corp. out of Willow Grove, Pennsylvania, and Medical Imaging Technologies in Colorado Springs. Both saw double-digit increases in the cost of their health insurance after the new healthcare proposal became law. Neither of these companies will be hiring additional employees anytime soon.

Country Insurance in Illinois and Rainbow Logistics in Alabama are also putting off hiring new employees due to uncertainty surrounding the new health care law.

And the list goes on.

The healthcare law is hindering job growth, but don’t take it from me. Take it from Chad Baus, Cottman Corp., and the thousands of other small business owners who have been impacted by the law. We have heard loud and clear from businesses around the country that they want the law repealed. In fact, more than 90 percent of our members favor repeal.

Small businesses have been clear that they would welcome reform that drives down costs. Healthcare costs are constantly increasing with no end in sight, and reform that helps contain costs and provide options for employers would be welcome relief to thousands of small businesses. But the healthcare law we have today only makes things more expensive to operate a small business.

That is why NFIB is leading the charge calling on Congress to make its first order of business to repeal this harmful and convoluted law. I commend the House of Representatives on its fast action to take up legislation to repeal the law. The Senate should follow suit. It is what’s best for the economy, and it’s what the American people want.

Small businesses aren’t just suffering under increased and new healthcare expenses, they are also being crushed by endless new taxes and fees included in the law. For example,
a new tax on the insurance plans most small businesses buy will go into effect in 2014 and ramps up to more than $14.3 billion per year.

There are other new taxes – including two new Medicare taxes, and a tax on tanning services that will hit more than 18,000 businesses nationwide. A costly new paperwork requirement requires businesses to file Form 1099s for every business transaction totaling $600 or more. With every new tax and every new paperwork burden, small businesses will be forced to spend more and more of their time and money on expensive health plans, tax compliance and accountants and less on creating jobs and growing our economy.

Increasing healthcare costs is the number one problem facing small businesses, and small businesses have been clear that they want reform that lowers costs and provides affordable coverage options. Instead, the healthcare law added new taxes, fees and mandates. This isn’t the reform small businesses asked for, and it will not help them overcome the ever-increasing cost of healthcare. It makes things even worse than before in a very difficult economy.

Something needs to be done, and repeal of this law is the best option. Small business owners like Chad Baus are already subject to a barrage of taxes and regulatory burdens as they work to be successful and grow their business. We should make it easier, not harder, for Baus and others to create jobs and grow our economy.

The first and most obvious step is to repeal the healthcare law. Congress should do the right thing and repeal the law to help our nation’s economy get back on its feet and allow small businesses to grow and thrive.

Danner is President and CEO of the National Federation of Independent Business.