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Letter from Ed: Uncertainty, Problems Remain After the Supreme Court Upholds Obama’s Health Care Reforms
Pallet Enterprise founder, Dr. Ed Brindley, shares his concerns over the pending health care reform changes and the uncertainty that still surrounds the details in the law and how it will affect small businesses.
By Edward C. Brindley
Date Posted: 8/1/2012
Like the whole country, and indeed the world, the pallet industry has been deeply impacted by the direction of Washington D.C. and the decisions made by our federal government. I cannot recall another time in my life when people seem to be any more divided on so many important issues.
I have never made any bones about my personal beliefs. Look in the dictionary under the word “conservative” and you may see my name and picture. And there is no more hotly debated issue in the country right now then the massive overhaul of the health care system that President Obama pushed through Congress a few years ago.
Most entrepreneurs with whom I have spoken were looking forward to the Supreme Court possibly overturning the Patient Protection and Affordable Care Act (PPACA). Business people know that the way this issue was handled makes absolutely no common sense at all. It’s not that we deny the need to do something about the rising cost of health coverage. And it isn’t that government has no role to play in the process. It’s just that the current reforms won’t work and combine some of the worst aspects of proposed solutions all in the name of compromise.
And even more importantly, certainly Constitutional principles are so important that they shouldn’t be compromised even in the name of trying to do something good or fix a legitimate problem. Expansion of the federal government’s role into forcing people to buy health coverage or otherwise pay a tax is an incredible over reach of federal government power.
What does the recent Supreme Court decision mean to the pallet industry? From conversations with people in the pallet industry, there is little doubt that the majority of business owners are concerned about the impact of the reforms. Most want their people to have medical coverage and many of them offer this coverage. But virtually all are concerned that the reforms will not deliver on Obama’s problems, and the “solution” will be worse than the problem.
Business levels are very soft today, partly because of the uncertainty in our society. The landmark Supreme Court decision was supposed to end speculation and create some degree of certainty for businesses to make plans for future health care expenditures. But the truth is that the decision has only settled some issues. More questions remain than have been answered. For example, the Supreme Court decision allows states to opt out of new Medicaid requirements to expand the state-federal insurance program to cover more poor people. Some states have suggested that they will not abide by the new Medicaid requirements.
Many of the little details about the new reforms were not spelled out by the PPACA and were left up to the executive branch to devise. These rules and policies could change greatly depending on who is in the White House next year. And Mitt Romney has promised to do what he can to limit or overturn the Obama health care reforms. In addition, changes in Congress could always lead to new legislation that limits the scope or impact of the PPACA.
So, certainty is far from a reality even after the landmark Supreme Court ruling. Plus, nobody really knows the true impact on health care costs. More people in the pool and state health care exchanges could lower costs. But a new maze of difficult regulations, uncertainty, government bureaucracy and expanded coverage could also increase prices for some companies and individuals.
Expanding the pool of coverage to include healthier, younger people is only part of the solution. The other key drivers for lowering costs may not be addressed by PPACA. It all depends on how the rules are written by the executive branch. This includes policies to streamline paperwork and record keeping, mechanisms to encourage more individual responsibility in limiting unnecessary medical procedures and treatments, and preventative medicine and health programs.
Some in the business sector are suggesting that the end result of the Obama health care reforms will be higher costs and job losses.
Dan Danner, president and CEO of the National Federation of Independent Business (NFIB), said, “Under PPACA, small-business owners are going to face an onslaught of taxes and mandates, resulting in job loss and closed businesses. We will continue to fight for the repeal of PPACA in the halls of Congress; only with PPACA’s full repeal will Congress have the ability to go back to the drawing board to craft real reform that makes reducing costs a number one priority.”
John Allison, former chairman and CEO of BB&T and a professor at Wake Forest University, said, “As if the law’s 2,700 pages weren’t enough, the law will lead to tens of thousands more pages of new regulations. These new regulations, some of which have already started to come from the federal government and many which have yet to be written, will pummel small businesses that are already struggling under burdensome health care costs with additional requirements, taxes, and penalties. Even the so-called benefits are too complicated. All of these added costs mean, perhaps most importantly, that the Affordable Care Act will fundamentally restrict businesses’ ability to hire workers, making our nation’s unemployment crisis much worse than it already is.”
The Obama administration contends the reforms will expand coverage, lower costs and improve the marketplace options for companies and individuals seeking coverage. The truth may be somewhere in the middle. But without a focus on limiting costs, the real problem remains. Allison further commented, “A market-based, patient-centered approach would go a long way to addressing the real issue in health care: increasing costs.”
One major unknown is how the punitive aspects of the reforms will impact the market, particularly the individual mandate. There are enough exemptions available that a large number of people may not be required to obtain health coverage. And even if they are, the fine for being uninsured is much less than buying coverage. Thus, the way the system is constructed it may actually encourage more people to remain uninsured unless they develop a health problem since they can’t be turned down for pre-existing conditions.
There are a number of changes to the tax code to help partially pay for the reforms and expanded coverage. Higher Medicare taxes for high-income taxpayers. Starting in 2013, taxpayers with earned income in excess of certain limits will pay an additional 0.9% Medicare tax on the excess. In addition, taxpayers will pay a new, 3.8% Medicare tax on unearned income, such as interest, dividends, rents, royalties and certain capital gains, to the extent that their modified adjusted gross income exceeds certain thresholds.
Health care now amounts to about one-fifth of the nation’s economy. And the Obama reforms will add billions to the federal deficit. It appears that there will be both winners and losers depending on your situation. For example, small businesses are exempt from requirements that employers have to provide health care coverage or pay a penalty if employees seek coverage through public insurance exchanges. PPACA defines a small business as any company with fifty or fewer full-time employees (those working more than 30 hours per week). In addition to adding up the full-time employees, an employer must also add up the hours for all part-time employees worked in a month and divide by 120. That total must be added to the number of full-time employees to determine if the employer must provide coverage.
Most small and medium-sized pallet and lumber companies are likely exempt from the coverage requirements. But if you are a larger company with multiple locations, you will likely have to offer coverage or pay a penalty once those provisions take effect January 1, 2014.
Some companies may be eligible to receive tax credits for offering coverage. If you have up to 25 employees, pay average annual wages below $50,000, and provide health insurance, you may qualify for a small business tax credit of up to 35% (up to 25% for non-profits) to offset the cost of your insurance. This will bring down the cost of providing insurance. Starting in 2014, the small business tax credit goes up to 50% (up to 35% for non-profits) for qualifying businesses. This makes the cost of providing insurance even lower. But that could be offset by rising premiums if the individual mandate does not push enough healthy people into the market.
Personally, I believe the complicated nature of the law, the bureaucratic wrangling between state and federal authorities, the loopholes limiting the effectiveness of the individual mandate, and the lack of focus on reducing unnecessary medical procedures and personal responsibility will doom the law to fail in its most important objective – driving down the skyrocketing growth of health care costs. And I believe the tax increases will stifle economic growth while too little revenue will be produced to offset the huge burden being overtaken by the federal government.