Phil Henderson is at a tipping point.
His small business, Henderson Properties in Charlotte, has 48 employees and seven job openings. But he’s considering a hiring freeze.
The growing company, which handles property management, maintenance and real estate sales, could use the extra hands, Henderson says. But if he hires two more employees, he’ll reach the 50-employee threshold that requires small business owners to comply with President Barack Obama’s new Patient Protection and Affordable Care Act.
Like many area small businesses, Henderson isn’t opposed to offering health coverage. In fact, he offers health and dental benefits.
But what if premiums spike, as many critics of the new legislation predict, and health care expenses become too high? Could Henderson then drop insurance coverage?
With 50 or more employees, he couldn’t, not without paying a federal fine.
“That may be one of the things we’ll have to weigh,” Henderson says. “I just don’t know if we can continue to afford it.”
Since the Obama administration rolled out its health care reform, small business owners nationwide have developed concerns similar to Henderson’s about what the “employer mandate,” starting January 2014, will mean for their bottom line.
“Anyone who is in the know about the law is concerned,” says Kenny Colbert, president of the Charlotte-based human-resources consulting firm the Employers Association, which has been leading seminars on the new health reforms.
“They’re going to have some difficult decisions to make.”
Cathy Graham, director of benefits services for the Employers Association, says she gets three to four calls a day from small business owners who are worried and confused about the implications of the 2,400-page piece of legislation.
Just last week, Graham got a 143-page document from the federal government fine-tuning a single facet of the reform – the 11th clarifying document she’s gotten so far.
Here are some points that are known about what the health care act means for businesses in 2014:
• During 2013, every business will be subject to an employee head count.
Employers can calculate their total number of employees by either averaging the total employee count over a consecutive six-month period or by averaging over the full 12 months of 2013.
• Businesses with 50 or more full-time equivalent employees must offer full-timers medical benefits that meet government standards, or potentially pay a fine of $2,000 or $3,000 per employee.
• Businesses with fewer than 50 full-time equivalent employees are exempt from providing insurance. But if they decide to offer it, they will be eligible for tax credits, according to the Internal Revenue Service.
• Employees without health insurance are eligible for the Affordable Insurance Exchange that goes into effect in 2014. Insurance companies will offer a variety of plans with basic comprehensive medical and prescription drug coverage.
Many North Carolina businesses already offer health insurance, according to 2011 data from the Department of Health and Human Services.
In fact, 96 percent of North Carolina’s private-sector businesses with 50 or more employees already do.
On the other hand, only 30 percent of the state’s companies with less than 50 employees offer health insurance.
That means it’s decision time for a lot of small business owners. ShopTalk spoke with several to find out their concerns:
Worried about rising premiums
With 21 employees, Rick Seifert, owner of Pest Control Authority in Charlotte, is well under the 50-worker threshold. So under the new law, he doesn’t have to provide insurance.
But it’s something he’s always done, and he considers it a worthy investment to keep workers. He’s always paid 100 percent of the health premiums for his workers. And in an industry with high turnover, Seifert said, his average employee has worked there for more than 12 years.
But now, he’s worried the health care act will raise his premiums beyond what he can afford.
That fear is well-grounded, some experts say. Brokers nationwide are warning customers about “tremendous increases in our premiums,” according to Colbert of the Employers Association. Colbert has 26 employees himself – and said his broker told him to anticipate up to a 20 percent increase next year.
To avoid potential hikes, some employers plan to drop health insurance, Colbert said, and instead help their workers get plans through the health care exchange.
“A lot of employers are saying ... ‘I’ll give them a couple hundred dollars a month to continue subsidizing because I’ve got to get out of the health insurance business,’ ” Colbert said.
Seifert is doing just that for 2014. For the first time, he’s asked his employees to each get individual plans that he’ll subsidize. But he fears the move could result in poorer health care for his employees.
“We’re in an unenviable position,” Seifert says. But “if you’re going to survive as a small business, you’ve got to be forward-thinking.”
Reaching the threshold
Brian Haupricht’s small company illustrates how part-time workers can push a business over the 50-worker threshold – thus making employer-provided insurance mandatory.
Haupricht is president of Park Inc., a parking management services company in Charlotte. He already provides health insurance for his 30 full-time employees.
He also has 420 part-time employees – from cross-walk guides to valets – who don’t get benefits.
Haupricht doesn’t have to insure those part-timers under the health care reforms. But he must combine those part-time hours and count their full-time equivalent.
That calculation pushes his worker count to well over 50. Like Seifert, Haupricht is also worried about rising premiums.
If they do rise, making coverage more expensive, Haupricht will still be required to offer insurance.
So until Haupricht figures out what this will cost the company, he’s freezing pay increases for hourly workers, “at least until we know what we’re up against,” he says.
Seeking more information
More than 400 business leaders and health care providers attended a recent meeting at CPCC’s Harris Conference Center to learn about the health care act.
Among them was Phil Henderson of Henderson Properties.
He’s still weighing the value of growing his business, versus exceeding the 50-employee threshold that makes health insurance mandatory.
Henderson just got a quote from his broker, telling him to brace for a 25 percent increase in premiums if he keeps his same health care plan.
To avoid exceeding the threshold, Henderson is considering other options: independent contractors in lieu of full-time workers, or even splitting various divisions into separate companies.
“All that stuff costs money, and (creates) administrative nightmares,” said Henderson. “Any way you shake it, it’s bad for business.”