While it's still early to project the financial consequences of health care reform on small business, a few emerging themes make it possible for business owners to head off some costs and taxes, says Rick Kahler, a certified financial planner who heads the Kahler Financial Group in South Dakota.
Here are five ways health reform could impact your finances, and what you can do about it:
1. Lock in Low Rates Now: The Congressional Budget Office now predicts that health care reform will increase the already-bloated federal deficit. Inevitably that means higher interest rates to come. Kahler advises business owners to refinance loans now to lock in today's low interest rates, and avoid new debt.
2. Secure your high-deductible health plan: Beginning in 2014, deductibles for group health plans are capped at $2,000 for individuals; $4,000 for families. But existing policies with higher deductibles will likely be grandfathered, so Kahler suggests getting a high-deductible plan now to help keep future premiums more affordable.
3. Collect your Credits: Health care reform rewards companies that remain small and pay lower wages. For the next few years, firms with 10 or fewer workers and average annual wages less than $25,000 will qualify for a full tax credit of 35% of annual health insurance premium costs. For businesses with more than 10 employees the credit decreases based on the number of employees above 10 and of those whose wages exceeding $25,000.
4. Right-Size Your Payroll: Starting in 2014, businesses with over 50 employees must offer health coverage or face a penalty of $2,000 per employee, with no fine for the first 30 employees. Part-time employees are included. However, business owners and family members don't count and companies under 50 employees aren't penalized. To stay under the limits, some businesses should consider reducing employee count, outsourcing more work or even spinning off companies to non-controlled or affiliated groups.
5. Trim Insurance Extras: Insurance costs are continuing to rise sharply and will likely continue rising near term. To offset higher costs, Kahler suggests eliminating insurance for "extras" such as dental and vision. For closely held C corporations, a medical reimbursement plan may allow the business to write off all qualifying non-deductible expenses without being subject to the new caps placed on HSA and FSA plans.
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