Nowotny knows Squat! – Small Business Owners and Obama Care

I was a pretty good powerlifter in my youth and later as an old man. Powerlifiting involves three different lifts – the squat, the bench press and the deadlift. Even as an old man, my deadlift and squat at age 52 were almost as good as they were at age 22. So it may be said that I know “squat” and maybe not much about anything else. It certainly was true about Obama Care.

After the Supreme Court challenge, I determined that Obama Care would be the law of the land until the Republicans got the “ball” back. However, it seems that every time the Democrats throw them the ball, the Republicans throw it back. The plot continues to thicken with the implementation of Obama Care. Personally, I don’t think that I have heard as much propaganda from either side. It seems that “Double Speak” instead of English is the official language of the federal government. With all of the technological genius in this country, why do we need a Canadian firm to build the healthcare website? Why do we need to shut down the government over health insurance?  So many questions, so few answers. 

One thing is certain, it is the law for now and the best strategy for a small business owner is to understand and make it work for your advantage. My recommendation for the business owner with less than 50 employees all is to drop their group health insurance all together and allow employees to pick up individual insurance on the health exchange and qualify for healthcare subsidies. The employer can set up a medical expense reimbursement plan (MERP) to cover the employee for any out of pocket expenses up to a determined limit. 

If the cost of group family coverage for Juan Fernandez in the Bronx is $1600 per month for a family of four, and the company is paying $1000 for the employee’s coverage, what is it going to cost with individual coverage? Juan and his wife Lourdes are both 40 and have two minor children and earn $60,000 per year. The cost of coverage for Juan and his family on a Bronze Plan is $2,237 per  or less than $200 per month after applying nearly $8,250 in government subsidies. Juan’s employer will no longer face an annual premium expense of $770,000 per year for its 40 employees ($19,200 annually per employee). Instead the company will reimburse every employee for $5,000 of unreimbursed medical expenses annually from its MERP.  These payments will be tax deductible and will not subject to FICA or FUTA withholding or taxable to the employee. The maximum out of pocket for the employer is $200,000. 

What is wrong with that picture?  I am not certain when the “put me out of business part” takes effect. The business owner eliminates an annual premium expense of nearly $750,000 per year and provides a reimbursement program to keep employee’s out of pocket expenses at a reduced level. The company can provide reimbursement for MDs that are out of network and not part of the new network of providers. The employee will have two medical cards – one for the new individual coverage and one for the MERP. 

In life when you are dealt lemons, we are told to  make lemonade. We may not like the Affordable Care Act aka Obama Care but it is the law of the land. From the looks of it for the small business owner, the “bark” may be far worse than the “bite”

Remember to count your blessings today!

About gerrynowotny

I am a tax and estate planning attorney with a JD and LL.M in estate planning from the Univesity of Miami School of Law. I have worked in the life insurance industry for twenty three years and the last eleven in private placement life insurance.
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2 Responses to Nowotny knows Squat! – Small Business Owners and Obama Care

  1. Art Hebbeler says:

    Gerry, This is the clearest small business strategy description I have read yet. Obviously, the wisdom in communications you learned as a teen paid off!

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