Michigan Medical Device Company To Layoff 1,000 Because Of Obamacare Tax.

zbacku 2012/12/26 06:32:31
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New year, new taxes arrive with health act

Medical firms, consumers brace for changes that bring higher fees

Display Structures Inc. President Diane Dearing, with husband Steve, is worried about upcoming taxes.
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Display Structures Inc. President Diane Dearing, with husband Steve, is worried about upcoming taxes. (Todd McInturf / The Detroit News)

Taxpayers, especially businesses, will be hit with billions of dollars in new charges starting in January under provisions of the Affordable Care Act that will be ushered in with the new year.

Among the new provisions is a surtax on investment income for those earning $250,000 or more, a $2,500 cap on flexible spending accounts and a 2.3 percent excise tax on manufacturers of medical devices that has led Kalamazoo-based Stryker Corp. to slim its workforce.

The looming health taxes have taken a back seat to the expiration of the Bush-era tax cuts set to automatically increase Jan. 1 unless Congress takes action to avoid the recession-threatening "fiscal cliff." While the biggest provisions of the health care act — namely the individual mandate — won't take effect until 2014, notable tax provisions have taken hold, and some businesses say the coming wave will exacerbate an anemic business climate.

Stryker, which makes products ranging from EMS stretchers to knee replacements and surgical tools, is trimming about 1,000 employees from its global workforce of more than 20,000 in anticipation of the 2.3 percent tax on its sales of medical devices.

The company estimates it will owe $100 million in the first year, or about 20 percent of its global research and development investments.

"Stryker remains significantly concerned with the upcoming medical device excise tax and its negative impact on jobs and innovation, and will continue to work with Congress to try to repeal the tax," Stryker CEO Kevin A. Lobo said in a statement.

The Michigan Chamber of Commerce hasn't studied how the taxes will affect Michigan businesses and consumers, but the business organization believes the taxes will ultimately be passed down to consumers, said Wendy Block of the Michigan Chamber of Commerce.

What's more, many employers and consumers are not aware of the taxes in the pipeline.

"There is a hypersensitivity (to taxes imposed) in 2014, but a lot of the taxes hit in 2013," Block said. "It's been kind of off folks' radars, and at the end of the day they probably aren't too focused on them or aware of them."

Burden is spread out

The health care law, which opponents refer to as Obamacare, was enacted in 2010 and mandates most Americans obtain health insurance by 2014. It also sets up insurance exchanges, expands Medicaid eligibility, reduces the growth of Medicare's payment rates and taxes insurance plans with relatively high premiums.

The aim is to reduce the number of uninsured in the United States.

To pay for the plan, a series of tax provisions was enacted. Some are in effect, while the main impact will be realized in 2014 with a tax on health insurers as well as individuals who fail to buy insurance, under the so-called mandate. The layers of new tax provisions mean the law is scheduled to reduce the deficit over time. Repealing it would add $109 billion to the deficit over a decade, according to a July study by the Congressional Budget Office.

"One of our top priorities in crafting the Affordable Care Act was to ensure that health care reform would not add to the deficit," said U.S. Rep. John Dingell, D-Dearborn, who championed the legislation.

"To help pay for the ACA — which for the first time will provide health insurance to 33 million uninsured Americans — the law cracks down on waste, fraud and abuse in Medicare and Medicaid, and increases taxes for some in the health industry that will benefit from health reform through millions of new patients."

The tax burden to pay for the health care legislation is spread over several sources — drug companies, health insurers and even indoor tanning services.

"The impact of most taxes (is) on the margins and, depending on who you are shooting at, you may hit some other parties and collateral damage," said Tom Miller, resident fellow at the Washington-based American Enterprise Institute, a right-of-center think tank.

The 2013 tax that likely will have the biggest disincentive on business expansion, Miller believes, is a new 3.8 percent Medicare payroll tax rate on wages and self-employment profits above $200,000, compared to 2.9 percent.

"You are not just hitting more affluent individuals; you tend to hit the unincorporated smaller businesses," said Miller, co-author of the book "Why Obamacare Is Wrong for America."

Small business worried

Business has been struggling at Troy's Display Structures Inc. Unable to recover from the recession, the small manufacturer once employed 23 people but now is down to five.

President Diane Dearing believes the upcoming taxes through 2014 could be the last straw for businesses like hers trying to keep the doors open.

"It's one thing after another," said Dearing, whose company fashions metal for displays and exhibits. "… Nobody understood it (the health care law) when they passed it and, for the most part, a lot of people still don't understand it."

She's especially worried by the 2014 annual fee on health insurance providers, which is estimated to generate $60 billion through 2019. Businesses and employees, Dearing believes, will ultimately have to stomach the tax in the form of higher health care costs.

"There are so many stealth taxes that are going to affect us in ways we don't even realize yet," Dearing said. "I just wish they would be aboveboard and straightforward in taxation."

One of the new fees is a $63-per-person assessment that kicks in on medical plans. The temporary three-year fee starts in 2014 and declines to nothing by 2017. It's estimated to raise $25 billion to help insurers cover people with pre-existing conditions who can't be turned away under the law starting in 2014.

In all, the congressional Joint Committee on Taxation estimated in 2010 the health care act would generate $437.8 billion in revenue through 2019. The revenue was estimated at $38 billion in 2013 and $48 billion in 2014.

"In 2013, it's still a warm-up," Miller said. "The big show is 2014."

Read More: http://www.detroitnews.com/article/20121225/METRO/...

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Top Opinion

  • TheTruth1313 2012/12/26 06:52:43
    You Ain't Seen Nothing Yet.
    This will only be the beginning. That unjust socialist tax will wreak havoc and, even further destroy the economy.
    I can only hope that they plan to lay off all the idiots that voted for obama first.

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  • Cn2012 2012/12/30 18:13:33
    You Ain't Seen Nothing Yet.
    this is only the beginning.
  • Chris 2012/12/29 05:27:58
  • MW121 2012/12/28 04:01:35
    Care To Comment?
    This isn't the only medical company that will be doing this.. there's going to be many many more layoffs due to this excise tax.. Welcome to the new world we live in.. IT's crazy
  • stevmackey 2012/12/28 00:43:06
    Care To Comment?
    That should make the President proud.
  • SteveB 2012/12/27 00:26:50
    You Ain't Seen Nothing Yet.
    Just wait til the small bussinessmen like a guy who owns a machine shop who employes 6
    guys and makes $250,000 files taxes in the personal catagory has to lay off 3 guys
    because of obamacare.Then let's see how high the unemployment rate gets!
    We are in DEEP DO-DO!
  • hasher 2012/12/26 23:01:05
    Care To Comment?
    im very familiar with stryker. we do business withthem all the time at the hospital where i work . i will have toask the lady next time she comes there. they make great products. i love their soap we clean our instuments with. i hope obamacare doesnt hurt them too bad.
  • dallasjoe 2012/12/26 17:26:46
    Care To Comment?
    Bet Stryer has a Plant in China. I have 6 screws in my knee Made in China they were suppose to be made of Titanium but they were not. Made for Johnson and Johnson now I have to get them removed and another 8 weeks laid up.
    If Styker does ship the production to China ban their Products here CHINA makes JUNK
  • hasher dallasjoe 2012/12/26 23:03:52
    stryker makes many fine products i do their instruments all the time. they are a great company to do business with. i hope this doesnt hurt them too bad.
  • Artist~PWCM~ 2012/12/26 15:29:24
    You Ain't Seen Nothing Yet.
    You know, this is the part about the taxes built into obamacare I don't get. Why are there all these taxes placed on medical devices and services? Wasn't obamacare supposed to save money?

    Yep, you ain't see nothing yet. Many many companies are going to be dropping people from their rolls after the first. obamacare is just too damn expensive...
  • S and S 2012/12/26 14:19:45
  • Seonag 2012/12/26 13:58:51
    You Ain't Seen Nothing Yet.
    Of course, who uses medical devices? The ill and the aged. Obamacare hurts the people they claim to help! Oh, wait --- healthy women of child bearing age get fee birth control! Ain't that just great!
  • Sgt Major B 2012/12/26 12:32:35
    You Ain't Seen Nothing Yet.
    Sgt Major B
    The business of business is to make a profit, not provide a welfare system. If government regulation and taxes hinder that effort, businesses will make the necessary changes to survive, to include paring personnel or moving their operations to a more favorable clime.

    The lesson that was lost on the American people in the last election is quite simply the wisdom of the ages: "There ain't no free lunch!"
  • zbacku Sgt Maj... 2012/12/26 15:06:04
    The simple Truth. And America seems to ignore it.
  • Denai, The Li't Sasquatch 2012/12/26 10:07:26
    You Ain't Seen Nothing Yet.
    Denai, The Li't Sasquatch
    This is only the beginning.
  • Farnsworth 2012/12/26 09:07:19
    You Ain't Seen Nothing Yet.
    I say good! For putting Obama back into office, pain needs to be suffered.
  • Dagon 2012/12/26 07:55:13
  • robert.... Dagon 2012/12/26 12:48:09
  • AL 2012/12/26 07:48:39
    Care To Comment?
    Obama care at work! We must pass it to find out whats in it! Well I guess we're finding out whats in it now anyway
  • The Sane One 2012/12/26 07:05:25
    Care To Comment?
    The Sane One
    Just out of curiosity, did that company happen to give it's executives bonuses this past year?

    I wonder how many employees they could have kept if the executives had deferred even a small portion of their bonuses.
  • marianne The San... 2012/12/26 07:30:40
    so true.
    all this crying about american people getting health insurance.
    why not?
    if they had a better idea, why they never mentioned it.
  • AL marianne 2012/12/26 07:52:48 (edited)
    Hey I have an idea, why don't we just let Obama care put everyone out of a job, and run every company out of business-so we can keep asking china for none stop hand outs from now on instead
  • marianne AL 2012/12/26 08:36:12
    what's with america having no universal healthcare....
    people dying, having to file for a bancruptcy, those with coverage paying thru their nose...... it adds way too much to my stress, too many changes for falling thru the cracks, i mean, the insurance companies acting as gods, denying coverage for whatever reason...... puhleesee.....
  • robert.... marianne 2012/12/26 12:53:04 (edited)
  • marianne robert.... 2012/12/26 21:16:01
    sure, but it is a start.... at least the insurance companies can not deny coverage based on pre-existing conditions., kids can stay under parents' plan until 26...
    i thought that those who can not afford, would get subsidiced....;-]
  • robert.... marianne 2012/12/27 04:18:21
  • marianne robert.... 2012/12/30 20:11:34
  • THE One... marianne 2012/12/26 14:19:58
  • marianne THE One... 2012/12/26 21:18:08
    i don't know, our hmo just went up to 1500 per mo, being out of work, it is a lot to pay, i can not wait for an affordable insurance. somehow, i can not imagine going without.
  • THE One... marianne 2012/12/31 14:51:28
  • marianne THE One... 2013/01/01 02:40:51
    if the reportedly 40m uninsured enter the pool, my share just might go down. also, when we emphasize prevention, cost will go down for all.
  • THE One... marianne 2013/01/02 13:52:53
  • marianne THE One... 2013/01/06 00:16:50
    american uninsured stats

    i said reportedly......
  • THE One... marianne 2013/01/08 14:19:18
  • AL marianne 2012/12/26 19:37:00
    try using some common sense! Just who do you really think is going to pay for all the SO CALLED FREE HEALTH CARE ANYWAY? We can't even afford it in this bad economy! And thats just about what most employers are telling the government now as well!
  • marianne AL 2012/12/26 21:20:00
    rich america, poor americans.
    i am now paying for the freeloaders, i am looking forward for a more even playing field.
  • AL marianne 2012/12/26 22:40:01
    You still don't seem to understand we just can't afford this Obama care scam in this poor economy!
  • marianne AL 2012/12/30 20:21:24
    like i said, is america truly the only western industrialized country, that can not afford a comprehensive heatlh care? americans spend more on health care, yet statistically have more higher negative numbers. look at the infant mortality rates, etc. and don't forget, that ounce of prevention much cheaper that a pound of cure.
  • THE One... marianne 2013/01/02 13:53:31
  • marianne THE One... 2013/01/06 00:19:00
    do you not pay for your health care premiums now.
    if not the chances are that i am supporting you.
    i you are, then you are supporting the dead beats.
  • THE One... marianne 2013/01/08 14:32:10

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