News reports about the looming “fiscal cliff” scheduled to take effect on January 1, 2013 have been downright exhausting. The “fiscal cliff” is a term that describes the severely negative economic impact that will occur at the outset of 2013 as two self-imposed government deadlines converge. The first deadline is the expiration of the Bush tax cuts, which transferred a significant amount of money to the private sector. The second is automatic federal spending cuts that occur as a result of the debt ceiling agreement reached in the Summer of 2010 between Democrats and Republicans. Most economists predict that going over the fiscal cliff will plunge the lethargic U.S. economy into another deep recession. In a sense, our politicians set-up a future “gun-to-the-head” scenario.
Few news outlets are reporting on another complicating factor in the fiscal cliff negotiations. That factor is the impact of Obama Care on a struggling economy with unemployment hovering at 8% and rampant underemployment. Aspects of Obama Care – including tax increases – begin taking effect in 2013, but the Affordable Care Act (Obama Care) begins to take full effect in 2014. From an economic standpoint, Obama Care is essentially quick sand at the bottom of the fiscal cliff. Obama Care thrusts massive regulations on states, businesses and individuals, and both states and businesses are struggling to understand the true financial impact of the mammoth health care law.
Reports swirl about movement toward a fiscal cliff compromise between President Obama and House Republicans. While talk of a compromise may seem encouraging, it is quite obvious that any proposed solution is going to negatively impact businesses and business owners. Obama’s re-election ensures his health care plan will be implemented and seemingly gives him the upper hand in negotiations with Republicans on solving the fiscal cliff issue.
What is Clear as We Enter 2013?
While the outcome of fiscal cliff negotiations remains unclear, it is clear that 2013 and the next few years will pose significant challenges to businesses and business owners – particularly small business owners. The die has been cast. It is almost certain (we think 99% certain) that:
- Insurance Costs Will Increase
- Regulations and Their Associated Costs to Businesses Will Increase
- Taxes Will Increase
What Can Be Done to Blunt the Impact of Escalating Regulations, Insurance Costs and Taxes?
The battle facing businesses as we enter 2013 is really a battle of control. What will the business and its owners control and what will be controlled by government, government regulators and third party insurance companies. A powerful way for businesses to take more control over insurance costs, the impact of regulations and taxes is to own their own insurance company. And, an insurance company that insures its parent company (and related companies) is known as a captive insurance company. Captive insurance companies have been in existence since the 1950s, and the number of captives has blossomed from roughly 1,000 in 1980 to almost 6,000 today. Clearly, more and more businesses are moving to take more control in the areas of risk management, insurance costs, regulation and taxation.
CIC Services, LLC manages over 20 captive insurance companies. Our firm has worked with business owners seeking greater control over risk management, insurance costs, regulations and taxes. Contact us to discuss if owning your own insurance company is the right move for your business.
Phone – 865- 386-4920
E-Mail – Tom@CICServicesLLC.com
Web – www.CICServicesLLC.com