Chamber Forum: Healthcare Reform Represents Expensive Changes For Businesses

October 26, 2010

Leesburg Today

Kara Clark

Trepidation over the impending impacts of federal healthcare reform was tangible Monday morning during a seminar on the subject held by the Loudoun Chamber of Commerce.

State and local politicians joined dozens of business and community leaders for the session held at The National Conference Center. Virginia Secretary of Health & Human Resources Dr. Bill Hazel joined representatives from the U.S. Chamber of Commerce and the National Federation of Independent Business in explaining to those in attendance the ramifications of the recently passed legislation.

"How many of you here want to get rid of this bill immediately," Hazel asked the crowd. A majority of the room raised their hands.

"How many of you want to pay higher taxes," he questioned. No show of hands for that.

The financial implications of the bill are what are causing the most stress for business owners and have caused many, including the two organizations represented at Monday's forum and the state government, to take a stand against it.

Katie Hays, executive director of congressional and public affairs for the U.S. Chamber, described some of the costs that will be encountered by business owners when parts of the legislation begin taking effect.

"It's not cheap," she said of the legislation. "It's going to cost [the country] well over $1 trillion over the first 10 years."

Those costs will come from about $569 billion in new taxes and tax increases and $528 billion in Medicare cuts, she said. While much has been made about the benefits of employers providing insurance, Hays said there are a lot of hidden costs and other facets of the legislation that many are unaware of.

She pointed out the 40 percent excise tax on "Cadillac plans" beginning in 2018 as an example. Cadillac plans are regarded as unusually expensive health insurance plans, and, although the term is not defined in federal legislation, individual and family insurance plans beyond an annual cost threshold would incur this 40 percent excise tax.

Hays said, however, by 2018 it is likely that many insurance plans will be considered Cadillac plans, meaning more employers would be experiencing higher costs.

While existing insurance plans will be grandfathered upon the full implementation of the legislation, any significant change to an insurance plan would lose that grandfathered status, Hays said. This can include changing the amount of co-pays, changing carriers and increasing deductibles. She estimated that 70 percent of insurance plans will lose that grandfathered status by 2012.

The free rider mandate would also require businesses with 50 or more full-time equivalent employees to offer health insurance. These plans must be "affordable," Hays said, with the legislation defining affordable as comprising not more than 9.5 percent of an employee's household income. If the employer does not provide the health insurance, it would cost them $2,000 per employee over the 30-employee threshold. If a company does offer insurance but it is not deemed affordable, that penalty increases to $3,000/employee.

Those are but a few examples of some of the costs businesses will be experiencing in coming years, Hays said. Hays pointed to a survey of 600 small business owners conducted by the U.S. Chamber that showed how leery business owners are of the coming changes.

"Seventy-eight percent of business owners expect their [insurance] costs to go up. Sixty-five percent oppose the new law.

Fifty-five percent are less likely to hire new employees due to the new law and 44 percent of firms under 20 employees are concerned they wont survive the next five years," Hays said. "That's the mood we're seeing all over the country right now."

Bill Rys, tax counsel for the National Federal of Independent Business, called the federal legislation "Swiss cheese."

"It was passed with a lot of holes in it," he said. "We think it fails at the number one goal, which was to reduce costs."

He said the healthcare legislation was essentially "endless numbers of new taxes" and said 2014 will be the big impact year, when all citizens of the U.S. will be required to have health insurance, or face penalties. With states needing to pass enabling legislation for healthcare reform, Rys said it was states that have the opportunity "to do some interesting, creative things: provide more choice, lower cost, more clear information."

Although Hazel emphasized that healthcare reform "absolutely has to happen and it has to happen in Virginia," he too took exception to the impacts of the legislation on businesses and individuals. He noted that the state spends a lot of money wooing potential companies to the state, and is competing with the likes of China and Canada, both of which offer less burdensome health insurance requirements. Without much help anticipated from further federal action, or even a potential Supreme Court decision, Hazel said business owners have to do much of the legwork themselves.

"The job of employers in this market is to ask the insurance to pay for something different," he said. "We can drive some of the change with Medicaid, the state employee health plan. Insurance knows what we've been buying; they know how to deliver that to a point. But for them to re-figure their fee structures, their payment schedules they need to know we're still going to want to buy it."

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