Don’t Panic

As my colleague recently pointed out, employers responding to a Towers Perrin survey indicate cost will be their major concern in health reform. Watson Wyatt (soon merged with Towers Perrin) concurs in its own survey of 160 employers, which found that 73% believe health care costs will increase if health care reform legislation is enacted. Even more (86%) think the health care proposals being considered would weaken the role employer-sponsored plans play in providing health care coverage.

These concerns may be especially strong among small employers. Yesterday I talked with a friend in Texas who is starting up a management consulting business with a partner. They plan to hire eight to ten workers, likely through a professional employee organization (PEO). My friend’s partner is quite wary of government intrusion and wondered if it was true that he would have to spend an additional 8% of payroll on employees’ health care and when that was taking effect.

“Don’t panic,*” I told my friend, for several reasons:

1. There are five separate versions of health reform in Congress right now, and no one knows what will be in a final version, if any. No reason to worry about details that are unknowable.

2. All of the proposals do have provisions affects small plans, but they also have provisions that provide exemptions and credits to many small employers. For example, the 8% of payroll figure is only in one of five plans and there are lesser percentages applied to small employers. In fact, if you already provide health care to employees, reform could be a financial advantage.

3. How any of this would affect a PEO is unclear, although one amendment to the Senate Finance bill recognizes a variety of potential questions, including, will small businesses lose eligibility for the small business tax credit if they contract with a PEO for certain human resource services? Will small businesses otherwise exempt from the shared responsibility provisions become liable as a result of the small business-PEO relationship? The amendment can be found here.

4. Effective dates for various provisions range from 2010 to 2017, so right now there is no way to know when a provision might be effective.

So, to all you small employers out there, keep doing what you’re doing.** And don’t panic.

* The advice on the cover of The Hitchhiker’s Guide To The Galaxy, by Douglas Adams.** Paraphrase of end comment in the Food Network Series, Throwdown With Bobby Flay