WASHINGTON – Rick Mollica, owner of the Wishy Wash Laundromat in Silver Spring, searched for affordable health insurance several times in the last few years for his eight employees without any luck.
He said he doesn’t know yet if the new health care bill signed into law by President Obama on Tuesday will affect his laundromat, but he doubts it will make things better.
Even if Mollica could cover half the premium costs, he said, his employees would not be able to pay the rest because it is too expensive. And those are just the introductory rates — after a year, the prices automatically jump. Still, insurance for his employees is a “top priority.”
Many Maryland small business owners face the same problem as Mollica, and most don’t know yet what the law means for them. The requirements and benefits are determined by a company’s size and average employee salary, and some provisions begin this year while others don’t take effect until 2014 or later.
Businesses with fewer than 50 employees will not be forced to provide insurance for their employees. Starting this year, tax credits will be offered as incentives to help small companies offset the cost of providing coverage.
The smallest businesses, like Mollica’s laundromat, could be eligible for 35 percent of the cost of insurance premiums if they have 10 or fewer full-time workers earning an average of $25,000 or less. Companies with 11 to 25 full-time workers earning an average salary under $50,000 could receive smaller credits.
The Small Business Majority, a national policy organization, estimates 3.6 million small businesses nationally would qualify for the credit in 2010. Maryland alone has more than 500,000 small businesses, according to the U.S. Small Business Administration.
Companies with 26 to 49 employees are not eligible for tax credits, but they won’t be required to purchase coverage. Beginning in 2014, businesses with 50 or more employees must provide insurance or be fined.
The current bill calls for a $750 penalty for each employee, but the reconciliation version before the Senate would charge $2,000, while exempting the first 30 workers.
Despite some aid from the tax credits, the Maryland Chamber of Commerce doesn’t think the legislation will help small businesses.
“The bill that was signed into law doesn’t really reduce the cost of health care or slow the growth in health care costs,” said Ron Wineholt, vice president of government affairs. “All in all we think it’s a bad deal for business.”
Restaurant owners are particularly anxious to understand how the bill will affect them. The restaurant industry employs many part-time employees and the reconciliation bill would make owners count part-time workers, using a formula to determine how many full-time workers they equal.
The potential $2,000 penalty concerns the Restaurant Association of Maryland, said Melvin Thompson, senior vice president of government affairs.
“That would be a huge financial obligation that would again significantly affect our ability to create and maintain jobs,” Thompson said.
Many restaurants are struggling for survival now and cannot afford any new financial burdens, said Larry Metz, owner of The Wellwood seafood restaurant in Charlestown, Md. The Wellwood has been owned by his family for more than 40 years.
“I’m kind of weathering the storm right now…waiting to see what it’s going to cost me. To me, ultimately the consumer’s going to pay the price,” Metz said.
There are other peculiarities in the bill that could hit some businesses harder than others. For example, tanning salons were singled out for a 10 percent tax on tanning services beginning in July. And nonprofit small businesses will only be eligible for tax credits up to 25 percent, instead of 35 percent.
The bill also mandates state-run health insurance exchanges be created by 2014. Businesses with up to 100 employees would be able to purchase insurance through an exchange, and smaller businesses with 25 employees or less could receive tax credits for the first two years they use the exchange. Businesses with more than 100 employees could join starting in 2017.
Maryland Citizens’ Health Initiative President Vincent DeMarco said the Maryland exchange will help small businesses by providing them with negotiating power.
The bill will also help small businesses by lowering health care costs, he said. By expanding coverage to the uninsured, DeMarco said the “hidden costs” of paying for them will end.
To meet the federal requirements, Gov. Martin O’Malley Wednesday announced the creation of a special council. The council hopes to have a timeline for implementing the reforms by this summer.
The U.S. Small Business Administration also plans to help educate Maryland companies on the bill’s requirements, said Brian Goodrow, communications director for the region that includes Maryland.
One potential benefit for small companies is they may be able to compete with larger companies for the best employees by offering insurance.
Michael Wright, owner of TechtroSpect, a computer repair shop in Laurel, said he works alone now but hopes to start hiring this year.
“Being able to offer health care, offering benefits, would be beneficial” for attracting quality workers, Wright said. “I do think as far as small businesses being competitive in the marketplace, it’s awesome.”
Jim Hook, owner of Jim’s Complete Car Care in Cumberland, agrees not being able to provide insurance puts him at a disadvantage when it comes to hiring. He used to offer health care plans, but hasn’t in the past few years because prices are “astronomical.”
He’s not sure how the new bill will affect that.
“I really don’t know yet, I’ve heard so many conflicting stories on it,” Hook said. “I don’t think it’s a good idea.”