While it's still too early to know all the financial consequences the health care bill may have for business owners, they should start now to consider financial strategies to manage possible increased costs, taxes and borrowing rates.
A recently released study found the Congressional Budget Office overstated projections that the health care bill will reduce the federal deficit and may actually increase it. That could affect the cost of business borrowing, warns , advises financial planner Rick Kahler, president of Kahler Financial Group, based in Rapid City, S.D.
"Higher government debt could put upward pressure on interest rates," Kahler said. "Business owners should consider refinancing loans now to lock in today's low interest rates, as well as pay off existing debt and avoid new debt."
Beginning in 2014, deductibles for group health plans cannot be higher than $2,000 for individuals and $4,000 for families. But existing policies with higher deductibles will likely be grandfathered, so Kahler advises business owners consider implementing a high-deductible plan now to help keep future premiums more affordable.
"The health care bill rewards companies that remain small and pay lower wages," said Kahler.
He notes that for the next few years small firms with 10 or fewer workers and average annual wages under $25,000 will be eligible for a full tax credit of 35 percent of annual health insurance premium costs. But that tax break will be phased out for businesses with more than 10 workers with the amount of tax credit decreasing based on the number of employees above 10 and of those whose wages exceed $25,000.
Starting in 2014, the health care bill mandates businesses with over 50 employees offer adequate coverage or face a penalty of $2,000 per employee, with no fine for the first 30 employees. For example, a firm with 100 employees will pay $140,000. Part-time employees do count toward the number of employees. However, owners and family members don't. Smaller companies with fewer than 50 employees are exempt from penalties.
"Strategies business owners could pursue to stay within those minimum employees, wage requirements might include spin off companies to non-controlled or affiliated groups, reduce employee count, or outsource work," Kahler suggested. "But, these actions could take a few years to implement, so even though some health care bill provisions don't start until 2014, start to explore these options now."
Kahler expects insurance costs to continue to increase in the near term. To offset higher costs, Kahler suggests eliminating insurance for "extras" like dental and eyeglasses. For closely held C corporations, a medical reimbursement plan may allow businesses to write off all qualifying non-deductible expenses without being subject to HSA and FSA plan caps.
"Perhaps the most important strategy is for business owners to pay close attention as the law is implemented so they can manage the health of both their businesses and employees," Kahler warned.
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