September 24, 2013

Employers working through health care confusion

By LaYLAN COPELIN Austin American-Statesman

AUSTIN, Texas — Austin restaurateur Robert Mayfield had been thinking about adding another location to his string of Dairy Queen franchises.

click image to enlarge

Robert Mayfield owns several Dairy Queen restaurants, including this one in Austin, Texas, but is delaying opening another one because of the confusion surrounding new health care legislation.

Austin American-Statesman / McClatchy Newspapers

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TIMELINE:

Oct. 1: All employers – whether they provide health insurance or not – must notify employees about the Affordable Care Act.

2014: Employers must determine whether they are "large" or "small" employers based on whether they have 50 or more full-time equivalent employees.

2015: The employer mandate begins, requiring large businesses to offer health insurance or face penalties.

EMPLOYER MANDATES: WHO'S AFFECTED?

Large employers with 50 or more full-time equivalent employees must either offer health insurance to full-time employees and their dependents or face a penalty of $2,000 per employee (minus the first 30 full-time employees).

Dependents are defined as children up to age 26. Spouses aren't considered dependents.

Small employers with fewer than 50 full-time equivalent employees aren't required to offer health insurance.

Full-time employees are defined as those who work 30 hours or more per week.

Employers don't have to provide insurance to part-time employees (29 hours or less), but they have to compute the total number of hours worked by all part-time and seasonal employees to determine whether an employer is large (50 or more full-time equivalents) or not.

But he has shelved those plans until he can sort out what the implementation of the Affordable Care Act – the federal law commonly known as "Obamacare" – will do to his business.

"I'm not doing it now," said Mayfield, who also owns Wally's Burger Express. "This has uncertainty in spades."

Mayfield's reaction to the health care law might be extreme, but his level of uncertainty about the new rules isn't unusual.

The complexity of the Affordable Care Act – the law is about 1,600 pages, with regulations exceeding 20,000 pages – is creating confusion for many employers, business consultants say. With an initial deadline looming on Oct. 1 for informing employees about their health care plans, many business owners are still unsure about what they should be doing, where they should be in the process or even where to go to seek help, experts say.

"Many employers are somewhat panicked right now," said Alicia Haff, president of Haff Consulting Services, who advises Central Texas business owners on the new law. "They are simply unsure of what they should be doing."

Rebecca Melancon, executive director of the Austin Independent Business Alliance, puts it this way: "I hear a lot, but mostly confusion."

The Obama administration has postponed until January 2015 the mandate for "large" employers – those with 50 or more employees – to provide health insurance or face penalties. But there is still a deadline looming for businesses to take some action. By Oct. 1, all employers, whether they offer health insurance or not, are required to notify their employees either about their company's insurance plan or about the new marketplaces that are opening to the uninsured.

While missing that initial deadline won't result in fines or penalties, business consultants say business owners shouldn't assume they have plenty of time to sort out their plans for dealing with the Affordable Care Act.

"It seems like there are some business owners that are just blowing it off, especially because the employer mandates were put off a year," said Beth Ruffing, an Austin manager with Insperity Inc., a company that provides human resources and payroll advice for about 200 small and midsized businesses in Austin. "This is going to be in place by January 2015, and the time to be planning and strategizing is now."

Although some employers are starting to focus on the health care law, most remain in a wait-and-see mode, Ruffing said. "I don't see a lot of business owners willing to make an immediate move."

The Kaiser Family Foundation's 2013 annual survey of U.S. employers confirms that.

The survey didn't find major changes in employer-based health benefits, the report concluded, but "more changes are expected over the next several years as many of (the) more far-reaching provisions of the health reform law will take effect in 2014."

Only 7 percent of employers with 50 or more workers don't offer health insurance, according to the survey. But not all of those insurance offerings meet the new law's standards, as Mayfield – the restaurant owner – discovered.

He said most of his 95 employees don't currently use his bare-bones coverage because of their share of the cost. He estimates that his workers would have to pay $200 or $300 a month for insurance that meets the new, higher federal standards.

"The biggest misconception is that it's going to be free," Mayfield said.

According to consultants, the law will be a bigger burden for service industry companies that have lots of low-wage, part-time workers – such as retailers and restaurant owners.

Richie Jackson, chief operating officer of the Texas Restaurant Association, said his members typically don't have the sales to support benefits for workers. He said a restaurant averages $79,000 a year in sales per employee as compared with big-box retailers who have about $750,000 per worker.

Still, Jackson said, "Most operators have reached the conclusion that they don't want to pay the penalties; they want to provide coverage."

Even if most employers do opt to offer the coverage, that doesn't mean all employees will be covered.

Under the law, employees who work 29 hours or less per week don't have to be covered. Jackson said two-thirds of restaurant workers are considered part-time, but a study of Houston eateries says employees averaged 32 hours.

That has led to reports of employers reducing their workers' hours to make them part-timers under the law.

Mayfield said a lot of his employees work overtime.

"I don't want my employees to have a 25 percent pay cut," Mayfield said. "If you are cutting hours for people who have worked for you for 10 years, that would hurt me."

On the other hand, Mayfield said he isn't sure he can afford to provide insurance – or the fines for not providing it.

Jackson said most restaurant owners are trying to identify critical workers who would be full-time with benefits and the others who should be part-timers without benefits.

Haff, the consultant, said employers should also be aware of a wrinkle in the law dealing with part-time or seasonal employees who might be entitled to insurance.

All of a company's part-time hours must be totaled to determine full-time equivalent employees.

Some "small" business owners who think they are below the 50-worker limit might find that they have 50 or more full-time equivalents and must provide insurance.

There also are broader issues for employers who offer health insurance to their employees.

Ruffing said all employers who offer insurance should be asking: "Do I continue to offer my plan? Or dial it back? Will the plan attract the talent I need and can I continue to afford it?" She said 20 percent to 25 percent of her clients have more than 50 employees and will be required to provide insurance or face fines by 2015.

Ruffing said one of her clients didn't realize that half of his 120 employees don't take his company's insurance. But what happens – and at what cost – if they suddenly all sign up?

That's what David Norris, owner of Norris Conference Center, must be prepared to address.

He has 75 employees at his five conference centers around the state, including one in Austin. Today, at least a third of his employees are covered by health insurance, and the company pays 80 percent of the premium.

As his whole workforce becomes eligible for insurance, Norris anticipates paying 60 percent of the premium – the minimum under the law. But because the company could be covering more employees, Norris said his share of the bill still will increase from $120,000 a year to at least $200,000.

His employees who previously were covered will see their premiums double, and the new employees – many of whom are making near the minimum wage – could see $200 to $300 in monthly premiums.

"They were shocked," Norris said. "I felt bad. It will put a greater burden on our employees."

The health care law doesn't require so-called "smaller" employers with fewer than 50 employees to offer insurance. But the law offers temporary tax credits to encourage smaller companies to provide insurance.

David Campbell, who owns Austin Pallet Co., said it will still be too expensive for him – and for his 25 low-wage employees.

"Most of my guys would rather have a little higher paycheck," he said.

He said the new law's mandated coverage – everything from mental health to substance abuse treatment – drives up the cost.

Campbell, 61, said he doesn't have insurance for his family or for his workers who might get hurt on the job.

"I spend a lot of money just taking people to the doctor," he said.

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