More cost and lots of confusion
Cost and confusion are the two main factors confounding employers these days as they prepare to comply with the Patient Protection and Affordable Care Act starting Jan. 1.
For businesses with hundreds or thousands of employees already covered by a company health insurance plan — like auto parts manufacturer Lacks Enterprises Inc., for example — it’s mainly the additional cost that has their attention. For smaller businesses with many seasonal and part-time employees — like Harbor Restaurants in Grand Haven — it’s cost, and also a question of what, exactly, the company has to do.
The first and most important determination businesses must make is whether they are “large” or “small” under the scope of the law. “Large” means the employer must provide health insurance. “Small” — less than 50 full-time equivalent employees — means no insurance coverage by the employer is required.
The key question sounds simple, but it isn’t.
Marti Lolli, director of health care reform at Priority Health, told a group of employers in Grand Rapids recently that some business owners who think they qualify as a small employer “may be a large employer.”
Another expert who spoke at the Alliance for Health First Friday Forum, Roger Edgren of McGraw Wentworth, said a presumably small business with a large number of part-time employees or a large seasonal work force may have to limit the amount of hours they work each week, or provide insurance.
Priority Health has published “Reform School — A Workbook for Employers,” which it makes available to businesses, and Lolli specializes in a presentation she calls “Remedial Math (or How to Count to 50).” She said the most important issue facing employers now is: “They have got to understand if they are a large employer.”
A few facts illustrate how complicated the “50 or less” question really is.
- A person who works an average of 30 or more hours a week is counted as full time, under the ACA.
- Part-time employee hours must be counted, too, and added to the calculation. Add up all those hours worked in each month and divide by 120
- If the employer’s business is seasonal and exceeds the 50-employee count, but only for 120 days or less, it is not subject to the ACA.
The count of hours must take place each month, and actually is already underway, to determine Jan. 1 if an employer is required to be providing employee insurance during 2014. Each year the calculation must be repeated.
One of the biggest concerns among employers, according to Edgren, is part-time employees who average more than 30 hours a week. He said there are reports that many restaurant chains, which employ mainly part-time workers, are cutting the hours each employee can work in a week. One of his clients, said Edgren, has limited its part-timers to 27 hours per week.
Steve Loftis has been pondering the ACA requirements for some time now and said, “We have more questions than answers, at this point.”
Loftis is the owner of Harbor Restaurants in Grand Haven, which includes Snug Harbor, Dee-Lite Bar & Grill, Theatre Bar, Grand Seafood and Oyster Bar, and Jelly's. Grand Haven is a resort town, and some of the Harbor Restaurants are only open in the summer.
So: Is Harbor Restaurants a seasonal, small business or a large business, under the ACA?
“We’re probably going to fall under the threshold” of 50 full-time equivalent employees, said Loftis.
He is a past chair of the Michigan Restaurant Association and has attended several seminars the association has sponsored to help educate its members on the requirements of the ACA, but it is still not completely clear to him what he must do.
“We’re just trying to comply,’ he said, “and it’s very gray.”
Loftis said that if Harbor Restaurants comes close to the 50-employee count, it would be “taking a good, hard look” at a possible reduction of hours employees work.
It’s also not clear to him how an employee opts out of insurance coverage, or what happens then.
Loftis said an employer with several small incorporated businesses won’t be able to get around the law that way.
“It doesn’t matter if you’re an S corp or a C corp. You can’t carve out one business from another,” he said. The government will count all those employees together.
Michigan, in particular, is adding to the business owners’ confusion because it isn’t clear yet if there will be a state insurance exchange or one run by the federal government.
Loftis said a key issue for him is maintaining “a high level of trust and communication” with his employees and to be able to plan for them. “But quite frankly, we don’t know what to plan for,” he said.
Under the ACA, a person under the age of 26 is covered by his parents’ insurance plan. “If you’re working, does it change? I don’t know,” said Loftis.
At Lacks Enterprises, which like many manufacturing companies has good health insurance benefits for its 2,600-plus employees, the ACA will not change anything for those employees.
However, “it’s going to increase our costs $400,000,” said Jim Green, executive director of human resources at Lacks, an auto parts maker with headquarters in Cascade Township and 17 production sites in the southeast Grand Rapids area.
Last year, Lacks (which is self-insured) spent almost $21 million on health care for its employees — the corporation’s fourth largest expense after payroll, materials and chemicals.
Taxes and fees are, unfortunately, a part of the ACA.
Marti Lolli of Priority Health said the ACA entails five new taxes and fees that will be added to a large employer’s purchase of health insurance to cover the cost of the ACA. Some of the actual amounts, however, are still up in the air.
“The big one,” according to Green, is a $63 annual fee for each person covered by the employer’s insurance plan.
Lacks also is not sure how many people will be added to its employee insurance coverage, because about 500 of its employees now opt out of it and are covered by a spouse’s employment insurance benefit.
“Will some of them come back on ours?” wondered Green, noting that Lacks’ insurance may prove to have some advantages over the other coverage after the ACA is in effect. He believes so, with perhaps as many as 75 to 100 employees picking up insurance coverage offered by Lacks.
“As we look at the law as it exists today, there’s no benefit for any of our employees,” said Green, “meaning our plan that we offer our employees is better than what someone would get from the exchange,” and Lacks has not been charging more in co-pays and deductibles than the ACA allows.
Still, he said, the companies that are “really getting pinched” are those small businesses that did not offer insurance before but are over the 50-employee threshold.
“They don’t have the revenue to provide a plan like we do, but they have to provide (insurance) or pay the penalty. That puts the impact (of the ACA) on them,” said Green.
“There’s a force of power coming at us,” said Loftis. “We’re trying to explain it to staff, and we’re not clear. We’re not stupid here, but we’re not clear on things, and that’s unsettling for everyone.”