Federal health law may cost small businesses
LANSING — Some small businesses say they will be hurt by a “hidden” tax under the two-year-old federal health overhaul.
U.S. Rep. Gary Peters, D-Bloomfield Township, said the act provides $40 billion in tax credits during the next decade to help small businesses pay health insurance premiums.
The law lowers the cost of health care, Peters said, which saves small businesses money.
However, some small business people disagree.
Scott Lyon, vice president for small business services at the Small Business Association of Michigan, said the federal law is becoming a problem for small businesses.
“The problem is the cost: The act is doing very little to stabilize the lower cost of insurance,” Lyon said.
Charlie Owens, director of National Federation of Independent Business in Michigan, agrees. “Part of the problem is that the Obama administration has been playing favorites with stakeholders in the financing of the health insurance act.
“By favoring constituencies, the cost of the plan is not spread out among all the players. The result is targeted funding mechanisms such as the health insurance tax.”
The cost of health insurance tax will fall directly upon small business owners and the self-employed when it takes effect in 2014.
“The tax is levied on insurers in the commercial health insurance marketplace,” Owens said. “This is where almost 90 percent of small business and the self-employed purchase insurance for themselves and their employees.
“The companies will pass this cost directly on to these employers and their workers. Analysis indicates that this will equate to $500 per employee, per year.”
A survey by the consulting firm Mercer found 19 percent of firms with fewer than 500 employees are likely to drop health coverage.
“The reason most small businesses cannot pass on the cost is because of the competitive nature of most of the markets they operate in,” Owens said.
Usually small businesses will stop hiring, cut working hours, save equipment costs or increase product price, if they have to afford higher health care, he said.
“The bottom line of this approach is that employees are taking a pay cut,” he said.
In 2010, 55 percent of Americans got health insurance through work, according to the U.S. Census Bureau. This is compared to 65 percent who got health insurance through work a decade ago.
“I care about people, I care about my employees and I care about my small business. What good is it for our state and country if my small business is out of business?” said Tommy Brann, owner of Brann’s Steakhouse & Grille in Grand Rapids.
A report from the U.S. Congressional Budget Office and Joint Committee on Taxation said the law would lead to a “small but not dramatic” reduction in the number of people receiving employment-based health insurance.
The report acknowledges “a tremendous amount of uncertainty about how employers and employees will respond.”