March 24, 2010

Measure's impact on small businesses expected to vary

Some could enjoy tax benefits soon; for others, there are fears of costly mandates starting in 2014.

By John Richardson
Staff Writer

Doug Newman believes that his company, Newman Concrete Services Inc. in Richmond, won't pay any immediate costs from the sweeping health care reform law signed by President Obama on Tuesday.

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Companies with 25 or fewer employees:

• May qualify for a tax credit starting this year to offset as much as 35 percent of their health insurance costs. The amount of the credit will vary depending on the size of the company, and employers must pay at least 50 percent of the premium costs. The credit goes up to as much as 50 percent of premium costs in 2014.

• Will be able to buy insurance through large pools, called exchanges, beginning in 2014. Self-employed people will be able to buy coverage through the exchanges, too, but will not qualify for the employer tax credits.

Companies with more than 50 employees:

• Will be assessed fees if they do not offer health insurance or if they do not offer affordable insurance and an employee uses a federal subsidy to buy insurance individually. The penalty could be as much as $2,000 for every employee after the first 30.

But, he said, if he rebuilds his work force to 51 or more employees, mandates in the law could cost him an additional $100,000 a year.

"I'm basically relegated to 50 employees or less," he said. "There's no way anyone is going to hire number 51."

Jim Amaral, owner of Borealis Breads, expects to spend more money as soon as the mandates take effect in 2014, because his company already has more than 50 workers and will have to expand its coverage.

But Amaral, unlike Newman, is confident that the law ultimately will control rising insurance costs and make his business healthier and more competitive.

"The cost of health care has had a huge impact on our business," he said.

The tale of the two Maine businesses shows just how complex the new reforms are. No two businesses will be affected in the same way.

Some companies with fewer than 25 workers, for example, could benefit as soon as this year from new tax credits to help cover health insurance premiums. Some companies with more than 50 employees, meanwhile, could face costly new mandates when other parts of the law take effect in 2014.

Parts of the reform won't officially be settled until the U.S. Senate passes a package of changes, which is expected to happen this week. And some details may depend on how the complex law is implemented.

"It's a very complicated, interrelated piece of legislation," said Trish Riley, director of the Governor's Office of Health Policy and Finance. "We have the architecture of the bill. We don't have details."

Maine's two Democratic U.S. representatives, Chellie Pingree and Mike Michaud, say the law will provide relief for ailing businesses and allow more companies to provide insurance.

"The legislation we passed is going to immediately provide a 35 percent tax credit for most small businesses, increasing to 50 percent in a few years," Pingree said in a written statement Tuesday.

And 97 percent of Maine businesses have fewer than 50 workers, so they are too small to be affected by employer mandates in the law, according to Pingree and Michaud.

Maine's two Republican senators, Olympia Snowe and Susan Collins, have criticized the law for putting new burdens on businesses and potentially hindering job growth.

Joel Allumbaugh, president of the Maine Association of Health Underwriters, said in an e-mail Tuesday that insurance brokers are fielding many questions from business owners this week.

Allumbaugh called the reform package a job killer, citing mandates that will apply to employers with more than 50 workers.

"Companies are already struggling to survive in this economy," he wrote. "This bill will kick them while they are down."

Maine's smallest employers appear to have the most to gain from the law, at least in the short run. That's in part because new tax credits for companies with fewer than 25 workers are among the first changes, scheduled to take effect in September.

"There are almost 34,000 business that meet that criteria, out of 46,000 firms in Maine," Riley said.

To qualify, a small employer must provide insurance to workers and pay at least half the premium cost, among other requirements.

Doug Newman's concrete business is too big to qualify for the new tax credits. He has about 25 workers, although he had more than 100 before the recession hit.

Newman plans to keep providing health insurance to his workers, even though there is no requirement for companies with fewer than 50 workers to do so. He also hopes to rebuild his work force -- but not too much.

(Continued on page 2)

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