Stimulus bill includes painful surprise for Colorado small business owners

Face the State Staff Report

While the $787 billion federal stimulus bill included billions of dollars to bailout failing corporations, the expansion of health care benefits for displaced workers could have a devastating impact on some Colorado small businesses.

The Consolidated Omnibus Budget Reconciliation Act, or COBRA as it is commonly called, was enacted in 1986 and gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their former employer. Before the program was expanded under February's stimulus bill, an employee who was fired or quit his or her job could elect to extend existing health insurance coverage for up to 18 months and would be required to pay 100 percent of the monthly premium to his or her former employer each month. The program is available to most displaced workers, with exceptions for egregious misconduct.

Under the new extended COBRA plan, employers are now required to cover 65 percent of the premium for a former employee's health coverage participating in COBRA for up to 16 months after employment ends. The business owner can then file paperwork for reimbursement from the federal government through a federal income tax credit. Under the new policy, people who have lost their jobs between September 1, 2008 and December 31, 2009 and who have annual incomes of less than $125,000 (single) or $250,000 if married are eligible for the subsidy.

Employers who fail to contact employees who left after September of last year and make them aware of changes to COBRA are subject to a $100 per day fine per employee for every day after April 18 they do not contact their former employees.

"I've got to do something bizarre that people probably don't care about, or I could get sued and fined," said Jim Noon, owner of Denver-based Centennial Container. "My complaint for a lot of what the legislature is doing is now is that there's always something else I have to know about or risk getting sued."

COBRA, the federal program, applies to businesses with more than 20 employees. But dozens of states, including Colorado, have enacted what has been dubbed "mini-COBRA" for smaller concerns. According to fact sheets available from the U.S. Department of Labor, the national expansion of COBRA also includes over 500,000 small businesses in the state, many of which are concerned that the expansive new policy will bury businesses in paperwork and hurt their bottom line.

"From an administrative standpoint it is going to tax small business even further," said Tony Gagliardi, the Colorado director for the National Federation of Independent Businesses. "I hear from members all the time about how many man hours are spent just with compliance issues. This could very well be one of those instances where small employers are actually forced to hire consultants or full time staff member to administer this and ensure they are in full compliance."

In addition to the extra time and resources invested for compliance with new COBRA policies, many small business owners are concerned with increasing health care costs and government mandates that detract from the core functions of business.

"To the extent that an additional obligation is placed on an employer that hurts small business, hurts consumers and hurts the ability to create jobs," said Christine Burtt of the Colorado Republican Business Coalition. "It's a simple equation and basic economics. The more regulation, the less opportunity there is to grow a company and the fewer jobs that are created."'