Passion for Pizza - Columbia Business Times
Passion for Pizza - Columbia Business Times
Passion for Pizza - Columbia Business Times
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24 September 18, 2010 <strong>Columbia</strong> <strong>Business</strong> <strong>Times</strong> | <strong>Columbia</strong><strong>Business</strong><strong>Times</strong>.com<br />
SPECIAL SECTION | insurance<br />
CBT Q&A: The Pulse of Local <strong>Business</strong><br />
Calculating health care re<strong>for</strong>m’s<br />
impact on insurance costs<br />
The CBT asked Philip Naught<br />
with the Naught-Naught Agency<br />
in <strong>Columbia</strong> and Debra K. Mathes,<br />
a CPA and partner at Williams-<br />
Keepers LLC, about trends in the<br />
health insurance market and the<br />
impact of the new health care law.<br />
The cost of employee health insurance <strong>for</strong><br />
small businesses in <strong>Columbia</strong> has been<br />
steadily rising <strong>for</strong> years now. How does<br />
the cost this year, and the estimate <strong>for</strong> next<br />
year, compare with past years in your experience<br />
with clients?<br />
NAUGHT: This has been a fairly typical year<br />
<strong>for</strong> rate increases. We’ve seen groups that have<br />
double-digit increases as well as low singledigit<br />
increases. This is likely to continue into<br />
the future as premiums are closely tied to health<br />
care costs, which continue to rise.<br />
MATHES: Our clients continue to<br />
see increases in their overall health<br />
plan costs. We typically have seen<br />
increases of 6 percent and more,<br />
depending on the size of the plan.<br />
I estimate that the general trend<br />
<strong>for</strong> 2011 will continue upward, but<br />
more factors enter into the overall<br />
equation, including whether<br />
an employer is going to try, if<br />
allowed by their insurance carrier,<br />
to “grandfather” their plan from<br />
certain provisions of the Patient<br />
Protection and Af<strong>for</strong>dable Care Act.<br />
Do you predict that that costs<br />
will increase under the new<br />
health care law because it will<br />
require them to provide more<br />
benefits, such as coverage <strong>for</strong><br />
preventive care?<br />
mathes<br />
NAUGHT: The new health care<br />
re<strong>for</strong>m law requires a high level of<br />
services <strong>for</strong> preventive care. In the<br />
past, many health insurance plans<br />
included preventive care subject Naught<br />
to a deductible, co-insurance or<br />
a co-pay. Under the new law these services are<br />
required to be covered at no additional cost to<br />
the insured. Improved benefits <strong>for</strong> employees<br />
and higher expenses <strong>for</strong> the insurance company<br />
will likely push premiums higher.<br />
MATHES: I believe that overall costs will<br />
increase as a result of the new health care<br />
bill, but it might be <strong>for</strong> reasons other than<br />
enhancement of coverage changes. The Centers<br />
<strong>for</strong> Medicare and Medicaid Services actuaries<br />
per<strong>for</strong>med an analysis of the overall impact of<br />
health re<strong>for</strong>m on national health spending, and<br />
it showed a relative small increase in overall<br />
health expenditures as a share of gross domestic<br />
product by 2019.<br />
I anticipate an increase in premium costs to<br />
small businesses that historically have had relatively<br />
healthy employees and favorable claims<br />
experience, while others who have had unfavorable<br />
claims experience or difficulty finding<br />
coverage <strong>for</strong> employees might find their insurance<br />
premiums more af<strong>for</strong>dable. I also believe<br />
the compliance cost <strong>for</strong> small employers will<br />
increase significantly.<br />
A number of new reporting requirements that<br />
are a part of the PPACA could become a considerable<br />
burden on small employers. For example,<br />
the new law requires employers to report the<br />
“aggregate cost” of employer-sponsored group<br />
health insurance coverage, excluding any salary<br />
reductions deferred to a flexible spending<br />
account on the employees’ 2011 Form W-2s. We<br />
are expecting further guidance from the Internal<br />
Revenue Service on the factors to be used to<br />
determine this aggregate cost. This is just one<br />
example of numerous new reporting<br />
mandates that are a part of the<br />
new health care bill.<br />
A study sponsored by Families<br />
USA and Small <strong>Business</strong><br />
Majority, nonprofit organizations<br />
that describe themselves<br />
as nonpartisan, found that<br />
about 92 percent of Missouri’s<br />
small businesses (less than<br />
25 employees) are eligible to<br />
receive a federal tax credit this<br />
year if they purchase health<br />
care <strong>for</strong> their workers. Are<br />
small businesses in <strong>Columbia</strong><br />
applying <strong>for</strong> the federal tax<br />
credit?<br />
NAUGHT: We believe that qualified<br />
businesses will apply <strong>for</strong> the<br />
tax credit. Many health insurance<br />
company websites and the IRS<br />
website are offering detailed in<strong>for</strong>mation<br />
and calculators to help<br />
businesses estimate their potential<br />
credit. Due to some restrictions,<br />
businesses should work with their<br />
tax preparer to make sure they are<br />
calculating the credit properly.<br />
MATHES: Although we have had a number of<br />
inquiries regarding the credit, it’s impossible<br />
at this time to determine the credit <strong>for</strong> anyone<br />
whose taxable year has not ended because it is<br />
dependent on average annual wages. There are<br />
numerous eligibility provisions that must be<br />
met to qualify <strong>for</strong> the credit, and the premiums<br />
paid on behalf of the business owners are not<br />
counted in determining the amount of the credit.<br />
Additionally, businesses with the same owners<br />
are treated as a single employer <strong>for</strong> purposes of