November 30, 2018

How Health Care Expenses Can Bankrupt a Small Company

by William Browning, Isaac Wiles Burkholder & Teetor LLC

Many small companies are owned by one or two business owners who provide much of the labor and financial resources to create a successful business. If they are fortunate, they may have children, employees or friends who may wish to purchase the business.

There are two scenarios which often surprise business owners. Most business owners are careful in maintaining health insurance for themselves and their spouses. They also maintain disability and life insurance.

  • What if the business owner requires long-term nursing home care?
  • What if the owner’s spouse requires nursing home care?

Your health insurance or Medicare may cover up to 90 days of a long-term nursing home stay. Thereafter, standard health care insurance policies will not continue to pay for nursing home care. If you purchase long-term care insurance or a life insurance policy with a long-term care rider, you are protected to the greatest degree possible.

If you have not purchased this type of insurance and a health care crisis occurs, your business is a “countable asset” for Medicaid purposes. Medicaid allows certain protections for the well spouse, allowing him or her to retain the car, the house and up to $124,000 of “countable assets”. In Ohio, these assets include your family business. Succession planning in these circumstances is imperative. A carefully drafted Buy-Sell Agreement would also be helpful. Implementing such a plan becomes much more difficult if you have a stroke or your spouse has been diagnosed with early onset dementia. Without insurance, this planning is very complex and requires the best efforts of both a skilled business lawyer and elder law attorney.


Browning