Stimulus Package Hurts Small Business Owners

When Congress approved the Obama administration's economic stimulus package in February, a little-known provision aimed at easing the pain of healthcare costs for laid-off workers triggered a financial affliction for business owners.

Instead of planning weekend getaways with the money they save from laying off workers in stimes of low production, they are instead finding out that they are on the hook for more than they thought they were.

The American Recovery and Reinvestment Act reduces the amount laid-off workers have to pay in order to extend optional healthcare coverage under federally mandated COBRA (Consolidated Omnibus Budget Reconciliation Act) rules. Instead of writing monthly checks for 102 percent (the extra 2 percent for administrative costs) of the healthcare premium they enjoyed on-the-job, they now have to front only 35 percent. The caveat: The remaining 65 percent must be paid, up-front, by employers, which can then withhold the amount of the payments from their next federal payroll-tax contributions.