New Tax Laws and You

Local business owners seek understanding of health care law as specific rules, regulations take shape

By DOUG WILSON
Herald-Whig Senior Writer
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Quincy businessman Mike Nobis went to Springfield on Tuesday for an informational meeting on how the new health care law will affect businesses.

"I just about had a heart attack ... when I learned that in 2012 every business is going to have to do a 1099 (tax report) on every business-to-business transaction over $600," Nobis said.

Nobis wondered what those hundreds of business-to-business transactions have to do with health care. Experts with the National Federation of Independent Business speculate that the 1099 provisions were going to help generate fines when "16,000 new auditors" are hired by the Internal Revenue Service.

Bill Cox, president of Brown Drug Co., has tried to keep up on what the health care reforms will mean for him. He said he and most other business people still don't know much.
"Everything is gray. Nothing is written down so the layperson can understand it," Cox said.

Part of the reason for the uncertainty arises because the U.S. Senate and U.S. House still were making adjustments in the law Thursday. In addition, the law has to be translated into rules by several governmental agencies, and the provisions take effect gradually under annual deadlines through 2014.

Amy Looten, executive director of the Quincy Area Chamber of Commerce, said local business people need more information.
"As with any piece of legislation, the devil is in the details," Looten said.

"Right now, our business community is waiting for more information about the regulations that will be associated with this legislation. There's no doubt, though, that it will be an additional expense for every business and every taxpayer in the country."

Those expenses are expected because every U.S. citizen will be mandated to have qualifying health insurance coverage by 2014. Yet people whose income is up to four times the federal poverty level can qualify for some sort of government subsidy.

Since millions of people won't be paying the entire cost of their premiums, the government will have to come up with funding to help pay for the coverage. Rules in the Patient Protection and Affordable Care Act call for fining people who fail to buy individual policies or employers whose workers do not earn a certain amount or receive qualifying insurance.

Paying workers too little will trigger fines, and providing too much insurance coverage will trigger penalties.

"If that many people are going to get insurance, somebody's going to pay for it. It's a $900 billion cost, and the government has one way of raising money, and that's to levy taxes," Cox said.

According to the National Federation of Independent Business' analysis, employers with 50 or more employees will face penalties of $3,000 per subsidized employee or $750 for all employees, whichever is lower.

Nobis said that's a huge cost because families earning about $88,000 a year would be eligible for subsidies based on the federal poverty level of $22,050.

Companies and individuals with health savings accounts or flexible savings accounts will be affected in 2011. Some purchases will no longer be allowed, including most over-the-counter medications prescribed by doctors. HSAs and FSAs will be de-emphasized as health care reforms take effect. Maximum annual contributions to HSAs will be capped at $2,500, down from $5,000.

Companies that provide expensive insurance plans -- exceeding $8,500 a year for an individual or $23,000 for a family -- will face a 40 percent excise tax starting in 2013. This provision has caused many business owners to question why Congress wants to limit health care by attacking what are called "Cadillac plans."

Tanning salon's will have to charge a 10 percent excise tax starting in 2011.

That same year, all adult workers in the United States will automatically be enrolled in long-term care programs unless they choose to opt out. Retiree drug subsidy payments will be taxed under the new law.

Brand-name drugs will face an additional tax starting this year. The tax is expected to generate $2.3 billion, and although it has been described as a tax on manufacturers and importers, the higher costs will likely be passed along to consumers.

Health care providers will start paying more for medical devices in 2011. A tax on manufacturers or importers of medical devices is expected to generate $2 billion a year up through 2017. It will rise to $3 billion a year after that.  Cox said someone asked him recently whether the pharmaceutical industry would be affected by the new law. "I said it is going to affect everybody," Cox said.