Health care reform and small business: new requirements greatly affect businesses.

• Author: Waller, Jeff
• Position: LEGAL SPEAK

According to news reports, Pres. Obama argued that the only fair way to make insurers cover everyone was to require every individual to have health insurance. While this may be fair to the insurance companies, will it be fair to small business, which comprises 78 percent of Alaska businesses?

The five most feared words from the government used to be "we're only here to help," but now the most worrisome phrase may be: "mandatory health insurance for employees." Earlier this year, Pres. Obama signed the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. The new laws are complex and promise to give birth to voluminous regulations. Like any change in the law, there are benefits and liabilities. The new laws also contain several non-insurance requirements that will greatly affect businesses.

BENEFITS???

The health care reform laws are expected to benefit small businesses with lower insurance costs, reduced insurance administration expenses, making health insurance available through the business, providing a tax credit, and expanding the available labor pool.

According to the White House, small businesses pay on average 18 percent higher premiums per employee than large businesses, and incur three to four times the administrative costs to establish and maintain a health care plan. The health care reform laws are intended to reduce these costs by allowing businesses to pool together in purchasing health insurance. Because the insurance will ultimately be provided through the Small Business Health Options Programs ("SHOP Exchange"), this is expected to reduce administrative costs, arguably saving businesses money and making them more competitive.

LLC AN ANSWER?

For many Alaska small businesses, including the self-employed, the new laws provide the benefit of being able to obtain health insurance through your business. However, this benefit does not apply to sole proprietorships, one of the most common forms of small business. As a consequence, many such businesses will either incorporate or form a limited liability company ("LLC") so that the business tan pay for the health insurance. Forming a corporation, or LLC, will be an additional expense to the business and will require additional time and specific recordkeeping that is required for a corporation or LLC.

HIGH WAGES HURT?

The health care reform laws include a small-business tax credit of 35 percent of health insurance premiums paid to...