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Published: Sunday, 10/3/2010

Law stirs fiscal health worry among local small-business owners

BY SHEENA HARRISON
BLADE BUSINESS WRITER

Detroit Stoker Co. prides itself on providing better benefits than most companies.

The Monroe firm, which designs stokers and combustion equipment, offers fully paid medical, dental, and vision insurance to its 70 full-time employees as well as paid medical coverage for retirees.

Company President Thomas Giaier is concerned that federal health reforms, which began taking effect last month, could cause the firm to revise its long-standing practice of paying for comprehensive health coverage.

“This plan is dragging us down,” said Mr. Giaier, who added that his employees are worried about possible health-insurance changes.

Detroit Stoker is one of several companies in the Toledo area concerned about how federal health reform could affect their costs. The Affordable Care Act, signed into law in March, includes conditions that could affect how small businesses pay for and structure their benefits plans for the next few years.

Proponents say the law will help make health care more affordable in the long run for small businesses, while critics predict higher costs. The reactions of several business owners who spoke to The Blade ranged from dissatisfaction with the new laws to uncertainty about what it means.

Hernan Vasquez, president and chief executive officer of Mandell-Vasquez Inc. in Toledo, said the reform didn't go far enough because it doesn't provide a nationalized, government-sponsored plan.

Still, he hopes new health-care tax credits for small businesses will help him reduce his company's premiums, which are about $100,000 a year for up to eight employees. His company, which has annual revenues of $3 million to $4 million, supplies fans, grills, ductwork, and other products for the heating and ventilation industry.

“We are picking up a large portion of health care at the time, which we can no longer afford and remain competitive,” he said.

Some experts say costs will go up for small businesses because health insurance premiums are expected to increase and companies may be expected to cover more people than in the past.

For instance, companies that buy new policies will have to offer employees the opportunity to cover their adult children up to age 26, said Jonathon Trionfi and Michael Krucker, employee benefits consultants with Plante & Moran in Auburn Hills, Mich.

And companies that buy new plans will have to cover 100 percent of all preventive-care costs. So a business that required a $15 co-pay for annual physicals under an old plan will be required to provide that exam free of charge, Mr. Trionfi and Mr. Krucker said.

Companies that already had insurance can be exempted from some of the changes under a “grandfather” clause that allows them to keep their previous policies. A company with that status would, for example, need to offer coverage for adult children up to age 26 only if those people don't have access to other coverage. Also, the company would be allowed to keep previous co-pays for preventive care.

The costs for some companies could be offset by a small-business tax credit.

Companies with fewer than 25 full-time employees and that pay less than $50,000 an employee in average annual wages can receive a credit that covers up to 35 percent of the firm's total insurance premium costs. The credit does not apply to company owners or their immediate family members, Mr. Krucker said.

About 84 percent of businesses qualify for the credit, according to John Arensmeyer, president and CEO of Small Business Majority, an industry advocacy group headquartered in Sausalito, Calif.

The credit increases up to 50 percent in 2014, when companies with fewer than 100 employees can start buying insurance through state-operated exchanges.

The exchanges are intended to help individuals and small employers buy affordable plans by pooling the buying power of small groups.

The tax credit, which is effective for the full 2010 coverage year, is expected to help small businesses manage increasing healthcare costs for the next four years until they can use the exchanges, said Sam Blair, network director with the Main Street Alliance, a coalition of small business organizations from around the country.

“These new exchanges are going to create opportunities for companies up to 100 employees to really have bargaining power,” he said.

States will have authority to help keep premiums in check, he added.

The numerous provisions in the health-care law have left many small business owners struggling to find out how it will affect them.

Local organizations such as the Bowling Green Chamber of Commerce and the Employers' Association in Sylvania, have held seminars about the new law.

Earlene Kilpatrick, the Bowling Green chamber's executive director, said about 130 business owners have attended its two seminars this year.

She said some small business owners seem nervous about the new law.

“You throw in the state of the economy, you throw in the economic stimulus, as well as the finance reform,” she said.

“Truly, I think smaller businesses and midsized businesses are having a very tough time navigating the changes that are being put upon them.”

Holding pattern

Terry Vernier, project manager with the Employers' Association, said uncertainty about health reform has put many of the organization's local members in a holding pattern.

“Some of them are to the point where they're hesitant to hire or add staff because they don't know how much a new employee is going to cost them,” he said.

The National Federation of Independent Businesses, a Nashville-headquartered trade group for small businesses, has joined a lawsuit in Florida that aims to repeal many parts of the new bill.

The organization argues that health-care reform will generate high costs and continue to create uncertainty among small business owners, which could stifle growth of entrepreneurial companies, said Michelle Dimarob, manager of legislative affairs.

Mr. Arensmeyer of Small Business Majority contended that only a small number of businesses will face noticeable changes under the new health-care rules.

He said 96 percent of businesses nationwide won't be required to offer insurance, because they have fewer than 50 employees. Of the remaining companies, 96 percent already offer health coverage, he said.

He said that although some business owners are confused, they tend to feel more positive about the law when they receive more information.

Amy Craft Ahrens, owner of For Keeps in Bowling Green, is unsure what to think about the new laws. She has two full-time employees, including herself, and seven part-time employees at her downtown gift shop.

Amy Craft Ahrens, left, with part-time employee Katie DeVore, says she hasn't had time to study the various facets of the law and how they would affect her downtown Bowling Green gift shop. Amy Craft Ahrens, left, with part-time employee Katie DeVore, says she hasn't had time to study the various facets of the law and how they would affect her downtown Bowling Green gift shop.
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She supported health-care reform because of its benefits for individuals. But she said she hasn't had time to study the various facets of the law and how they would affect her store, which has been open for 13 years.

“Until you're forced to do something about it, the day-to-day running of your business is more important,” said Ms. Craft Ahrens, who does not provide insurance for her employees. “When I need to make those decisions, that's when I'll deal with it.”

For Keeps could be eligible for a small business tax credit starting this year if Ms. Craft Ahrens began providing health insurance to her employees. But the law does not require her to do so.

Companies with more than 50 employees will face financial penalties in 2014 if they do not provide coverage, said Mr. Krucker of Plante & Moran. Businesses with fewer than 50 employees are not subject to that penalty.

Mandell-Vasquez, which has been in business since 1955, formerly paid 100 percent of employees' health-insurance premiums. Mr. Vasquez said providing insurance has played an important role in his company's longevity.

“When [employees] are worrying about a critical issue in health, they cannot do the best performance in work,” he said.

The company began paying 75 percent of health-care premiums several years ago. Mr. Vasquez said the change was precipitated by his company's difficulty in keeping up with premium increases of up to 20 percent a year.

He plans to apply for the small-business tax credit in hopes of allaying some of the cost increases.

Mr. Giaier of Detroit Stoker worries that his company's fully paid benefits will cause the company to be subject to the law's new excessive-benefits tax, which will become effective in 2018.

Mr. Krucker of Plante & Moran said the tax is to help pay for the new law's implementation. The excessive-benefits tax will charge insurers for premiums that exceed a set threshold, and there is concern that insurers would pass the additional tax on to companies.

Mr. Giaier said his company is reviewing its health-insurance policies but hasn't made any decisions about changes. He worries that the new law could change the coverage Detroit Stoker has provided for many years.

“It should be up to us to make these kinds of decisions, and it's out of our hands,” he said.

Contact Sheena Harrison at:

sharrison@theblade.com

or 419-724-6103.



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