The $187,500 Government Hit on My Business

I have suspected that this was coming, but I guess I have just buried my head in the sand, knowing that I would be taking a complete screwing and not wishing to contemplate it.

Sens. Edward Kennedy, D-Mass., and Chris Dodd, D-Conn., say their plan would preserve employer-sponsored insurance coverage and create an affordable public option for those who need it....

The bill includes a "pay or play" provision that would require employers to provide adequate coverage for their workers or subsidize a system that will.

"Pay or play" would require companies to pay the government $750 per full-time worker per year ($375 for part-timers) if they don't offer health coverage, or if they offer "qualified" coverage but pay less than 60% of workers' premiums. Small businesses that employ fewer than 25 workers would be exempt.   (Via Q&O)

I run a recreation business with about 500 part-time, seasonal employees.  Most of them work for the equivilent of about 1/4 of a year, or about 500 hours.  Almost all are over 70, and already on Medicare and Social Security, so we have no health plan  (no way to get a reasonable plan anyway for a bunch of 70 year olds).

Adding up the numbers, this turns into $187,500 bill I would have to pay to the government for not providing health care to people who already mostly have health care.  I will pay 1/2 the full time rate despite my employees working far less than 1/2 of the year.

One thing you can be sure of -- this may be the final death of my current human resources model.  We typically hire more people, working fewer than 40 hours, because retired folks don't generally want to (or can't) work a full week.   That's been OK, because 4 people working 10 hours a week has always cost me the same as 1 person working 40 hours.   But if I am getting charged $375 per worker whether she/he works 1 hour or 1000, you can bet I am going to hire fewer workers for longer hours.  There are probably a myriad of other implicaitons for my business model,  I just have not yet thought it through.


  1. Stephane:

    OUCH!! That hurts! I do not see the logic in this plan at all! Why is it that the small businesses are always the ones that get stamped on? Seems the same no matter where you live. Trust me it is no better here in Canada, perhaps even a little harder to start and run your own business. No wonder one gets a deal if you pay cash .... but that is another story!!

    BTW, I think that hiring persons over 70 is an amazing thing to do. Most people at that age are active and still may want to do contribute what they can. Hope I find someone like you when I reach there!!

  2. Stephen Macklin:

    There must be some sort of out in the bill for seasonal workers. This would wreak absolute havoc in the farming industry.

  3. Ian Random:

    I really wish we didn't have to pay for congresscrooks when they don't play well with capitalism. I can never understand the logic of encouraging employment by making it harder to employ people. But then again the only time they talk about employment is with heavily subsidized intermittent renewable energy.

  4. Not Sure:

    Good deal for the people who get to keep their jobs, I suppose.

    Just remember to not notice the rest, who are either let go or are never hired in the first place....

  5. spiro:

    Just another proof that "progressive" politicians favor Big Business over small businesses. And, further support for Coyote's thesis on how more government intervention = good for Big Business.
    I was doing the math for my business, and have come to the conclusion that the best thing to do is to halt any future expansion plans, make sure I keep my employee roster at 24 or less, and just take more of the workload on myself.

    Question: Looking at what the current administration and congress have already accomplished, and extrapolating this out for at least another 1.5 years, why would ANYBODY want to start a new business in the U.S.?

  6. Not Sure:

    "why would ANYBODY want to start a new business in the U.S.?"

    - spiro

    Because they're insane?

  7. Rick:

    The junto have no idea what they're doing... or maybe in some devilish way they do?

  8. joshv:

    Incorporate everywhere. Each campground gets a separate corporation. Keep each corp under 25 employees. What's that - 20 to 30 corporations? It'd be a pain, but accounting/legal costs for a small corp run under $1000/year. Hire a part time person to keep track of it all and keep up on state filings and such. All told it might cost $50k or more extra a year - much less than the healthcare costs.

  9. tomw:

    Spiro: Here is a case where a 'big business', i.e., greater than 25 employees is NOT being helped as you so state. How is this good for big business in this case? Costs go up or employee head count will go down, or another option to 'reduce' countable heads will be taken. In other words, just more red tape.

    What will happen is that every business affected will pay the 'fine' rather than the cost of health coverage. It's cheaper. No one will have their old health coverage. No one can buy yearly coverage for $750, so they will all cancel their coverage and use the subsidized government plan.
    Kennedy and crew are lying as usual.

  10. Russ R.:

    Change from an employee model to a partnership model where partners earn a portion of profits.

    Or have them work as independent contracters collecting a percent of revenue rather than a salary or wage.

  11. SunSword:

    I concur with the independent contractor model. Pay them as independents. They file 1099's. They pay 100% of their SSN (both sides) but if most are part timers they will get it all back anyway. They pay their taxes quarterly, and get it all back every yearly filing (assuming they are part timers and this is all they do).

    To make this even cleaner -- set up one single corporation, which handles all your new 1099 contractors. Your company makes bi-weekly payments -- a single check each two weeks -- to the contracting company. That corporation pays them all and handles payroll. Transfer your payroll processor to that company. That corporation submits the W2 information for each contractor at the end of each year to the government.

    Companies that hire independent contractors don't have to pay their SSN - no social security costs to the company. No health care required at all. They are simply a pass through.

    It is completely legal and it is how many people work in the IT industry.

  12. Kevin D:

    I have a similar business (though not seasonal) that employs mostly retired workers. I have alot of part-timers who do not want to work full-time and want to take a week off whenever they want yet like to earn a little extra money. They are not interested in any additional insurance. I've been somewhat afraid of seeing my business expand to the point where I'd would be under FMLA and other regulations. It's a shame that government punishes you for expanding your business. Just because you have over 25 or 50 employees doesn't mean your profits are greater than if you had 5 employees. Every time government thinks it's fixing a problem by passing one of these laws it creates an unintended consequence that ends up hurting the person they originally intended to help. I've considered that I may be able to increase prices knowing it will reduce the amount of business and number of employees needed. Whether profits could keep stable is questionable.

    I recently read a very good book that reminds me of what is happening to our country under this administration. It is FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression by Jim Powell. FDR was constantly trying to tweak the economy and help the little guy and in the end it was the little guy that got hurt. A very good read.

  13. Dr. T:

    Federal politicians have tossed out a number of funding proposals, so this idiotic Kennedy proposal (based on the disastrous Massachusetts experience) may not be the one that gets chosen. They're still trial-ballooning the tax surcharge plan, and they still haven't decided about removing the tax-deductibility of health insurance (that would raise tax revenues to help offset the costs of the feds plan). Of course, asking people who enroll in ObamaCare Insurance to pay the full costs is not on the table.

    Stephen Macklin said: "There must be some sort of out in the bill for seasonal workers. This would wreak absolute havoc in the farming industry."

    Congress only cares about agribusinesses, not smaller farmers. Agribusinesses get huge federal subsidies plus price supports, and I'm sure they'll use this as justification for larger subsidies. As usual, the smaller farmers will be shit out of luck. I expect a lot more "off the books" hiring.

  14. Nate:

    You should be ok. If all your part timers have Medicare and you require they contribute 40% to the cost of insurance I would assume all of them would waive your coverage and just keep Medicare. As long as they have other coverage you should not be penalized. As long as you don't offer them an incentive to waive your legal. The one benefit of these clowns writing the laws having no idea what they are doing is they leave gaping holes, i.e. first pass at mental health parity.

  15. Matt:

    You could break your company into 20 or so small companies, each employing fewer than 25 people.

  16. spiro:

    Tom, by "Big Business" I was referring to large corporations employing 500+ people, most of which already have employee health plan deals worked out with insurance companies.

    The locally-owned cheese factory/restaurant/credit union/janitorial service etc, will employee 25-50 people, still be considered a small business, yet not have it in their margin to provide 60% health care costs for their employees.

  17. Max Lybbert:

    Maybe getting canned will remind your former workers that the AARP isn't necessarily looking out for them. Unfortunately, it may give the wrong signal to your new (younger, hipper, and liberal) workers.