NEW YORK Rose Wang looks at her staff of 70 employees and wonders if she’ll have to lay off some of them to comply with the health care law.
The owner of Binary Group Inc., an information technology firm based in Alexandria, Va., is one of many small business owners who will be required to provide health insurance for her staffers under a provision of the law that goes into effect on Jan. 1, 2014. Wang already provides insurance, but she has struggled with premiums that have soared as much as 60 percent annually, so she requires employees to contribute to their coverage. She’s worried because she doesn’t know how much she’ll have to pay under the Affordable Care Act.
Wang’s worry is a gut-wrenching dilemma many small business owners are concerned that they too may face. Now that President Barack Obama has won re-election, the health care overhaul, which presidential candidate Mitt Romney promised to dismantle, is marching forward. Companies must decide before the start of 2014 what they’ll do to comply with the law. Right now, no one knows how much the insurance will cost, and owners aren’t sure if they’d be better off not buying it and instead paying the government a penalty of $2,000 per worker. Some owners are even threatening to defy the law. The big challenge for most small businesses is that they just don’t have enough information to make concrete plans.
If Wang can’t afford the insurance, she says some of her staffers may have to go.
“I would have to say, ‘Look, guys, you’re family to me in many respects, but this family also depends on having the kind of cash flow available to keep the lights on and keep employing most of you,’ ” Wang says. “It would have to come down to that.”
Penalty an option
Not providing insurance and paying the penalty is another alternative. “That’s what we’re going to decide by 2014, if the math is so obvious it’s cheaper for us to do the $2,000 per head,” she says.
The health care law generally requires that companies with 50 or more full-time workers provide health insurance for their staffers. If they don’t provide any insurance, they’ll have to pay the $2,000 penalty for each worker on their payroll. If they buy insurance, but it doesn’t meet the government’s tests for affordable coverage, they’ll have to pay $3,000 for each worker whose coverage isn’t deemed affordable. If that seems confusing, that’s just the beginning. There’s a labyrinth of other details that include plans that can be “grandfathered” in, and a maze of other fine points that small business owners are trying to decipher.
In some industries, owners are considering cutting employees’ hours to fewer than 30 a week, which would take those workers out of the jurisdiction of the law. Restaurant owners are looking at that option after Darden Restaurants Inc. said in October it was going to try changing the mix of full-time and part-time workers at its restaurants, including Red Lobster and Olive Garden. When full-timers leave, Darden will considering replacing them with part-timers, spokesman Rich Jeffers says.
Hurricane Grill & Wings, a restaurant franchise with five company-owned restaurants, is also thinking of lowering the number of hours its servers and other hourly employees work. That would exempt them from having to be covered under the law. President Martin O’Dowd says the company would have to monitor the quality of its service and food to be sure there’s no impact on customers if workers are unhappy with their shorter work-week. But he’s not anticipating any problems.
Hurricane CEO John Metz recently said the company was considering adding a 5 percent surcharge to customers’ bills starting in 2014 to cover the costs of health care for full-time workers. But since the plan was reported in the news media – and generated negative comments on some websites – O’Dowd now says that option was “hypothetical.”
“That is not in our plans,” he says.
Even though some key details of the health care overhaul haven’t been worked out – like how much insurance offered through the exchanges will cost – there is already a lot of information to sort. Figuring out the details is keeping human resources consultants and benefits brokers busy.
“It is like a sleeping giant work up,” says Pamela Ross, owner of New York-based Atlantic Human Resources Advisors. “They are very much paying attention because so many regulations kick in for 2014.”
There are so many unknowns about the law that Campus Cooks is hiring an employee to determine what the company’s options are and how much they’ll cost. The provider of dining services for fraternity and sorority houses in the Midwest, Florida and Texas, has 125 employees.
“I don’t know what’s in the law,” says Bill Reeder, president of the Glenview, Ill.-based company. “I’m really hiring someone whose job, in part, for the next six months is to figure out this thing.”
Some small business owners who already provide insurance are looking at the law and weighing paying penalties against continuing to provide insurance that is more expensive. One risk is that dropping coverage may send a message to employees that the owner doesn’t care about them. That could lead some workers to quit.
“They’re looking at that and saying, ‘Well, if I stop providing benefits for my people, am I going to lose good people to my competitors who may not be taking the same approach?’ ” Ross says.