RICHMOND, Maine — With President Obama re-elected, the Democratic Party retaining control of the U.S. Senate and the U.S. Supreme Court ruling on the law’s constitutionality, it’s safe to say the Affordable Care Act is here to stay.
With that in mind, and the implementation dates of various facets of the federal health reform law approaching, business owners in Maine are beginning to take a closer look at the impact the law will have on their businesses.
Business owner Doug Newman, who employs between 40 and 60 people depending on the time of year at his concrete company in Richmond, is most concerned about the employer mandate aspect of the law. The employer mandate requires businesses that have more than 50 full-time-equivalent employees in the preceding year to offer a certain level of health insurance coverage or face a penalty.
Newman founded Newman Concrete Services 15 years ago and has provided its full-time employees with health insurance for the past dozen years.
“It’s something we take a lot of pride in and are happy we’re able to do it,” Newman said, “and to have uncertainty in that part of the business is disconcerting.”
Newman’s not clear on whether his company’s current plan will meet the various criteria laid out in the law. If Newman is forced to upgrade health plans, his business could face insurance cost increases of between $30,000 and $50,000 a year to comply with the employer mandate that kicks in on Jan. 1, 2014, based on preliminary estimates.
In fact, there’s a chance that if he dropped insurance coverage altogether, forcing his employees to find a plan at the public health exchange, the penalties he would face would be lower.
Companies that trigger the mandate but don’t offer coverage face a penalty of $2,000 per employee, not including a company’s first 30 employees. So, for example, if Newman had 52 full-time-equivalent employees and did not provide coverage, his penalty would be $44,000. The National Federation of Independent Business provides a one-page primer to help businesses figure it out.
However, another option would be for Newman to keep his employee numbers below 50 so as not to trigger the employer mandate.
“We’re just now starting to consider that sort of dynamic,” Newman said, “because we could certainly hover at 49 employees and not have to deal with [the employer mandate].”
It’s contradictory to the intent of the law that the employer mandate would cause employers to drop coverage, but Joel Allumbaugh, CEO of National Worksite Benefit Group, as well as director of the Center for Health Reform Initiatives at the Maine Heritage Policy Center, said that’s a very real possibility.
“There are some challenges afoot,” Allumbaugh said Wednesday morning at a forum hosted by the Maine State Chamber of Commerce about the ACA’s impacts on businesses. “What is the business community feeling? ‘Concern’ is a polite word; ‘terror’ might be more appropriate.”
Allumbaugh said he thinks “an alarming number of companies are going to stop offering health insurance” as they look at their options and see that, in many cases, it would be less expensive to drop coverage and let employees get coverage at the exchanges. “I think it is going to be just that simple,” he said.
No two businesses will be affected exactly the same, Allumbaugh said.
In fact, the majority of Maine businesses won’t be affected at all because they employ fewer than 50 full-time-equivalent employees. And the majority of large businesses already offer health insurance plans that likely will meet the law’s criteria because many of those businesses “want to be an employer of choice,” said Eric Altholz, an attorney at Verrill Dana who focuses on health care.
Besides the businesses that float between 40 and 60 employees, the most likely ones to face questions are the seasonal businesses that staff up in the summer.
The law says seasonal employees don’t count toward the employer mandate threshold, nor does it create its own definition of seasonal employees. It relies on the Department of Labor’s existing definition, Altholz said. That definition is as follows: “Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year.”
In other words, a blueberry business Down East does not need to count its seasonal blueberry pickers toward its employer mandate count because that job is not “continuous or carried on throughout the year.”
In addition, those full-time employees would need to be employed for at least 120 days.
So, it’s likely that a retailer whose employee count surpasses 50 during the holiday season would not trigger the employer mandate because it is less than 120 days.
The seasonal employee question does have ramifications for the hospitality industry, according to Chip Gray, innkeeper at the Harraseeket Inn in Freeport.
The inn employs around 160 people and so will easily trigger the mandate, but Gray said his business is an anomaly in the hospitality industry, where many businesses staff up in the warmer months (often more than 120 days) and close in the winter months. “This will be murder to the places that close up in the winter,” Gray said.
While many still claim the ACA is a job killer, there is evidence the pessimism isn’t warranted. Under the leadership of then-Gov. Mitt Romney, Massachusetts in 2006 passed its health reform law, which was used as a model for the ACA.
Since 2006, the number of Massachusetts employers offering health insurance coverage has increased slightly, according to Bill Graham, vice president of policy and government affairs for Harvard Pilgrim Health Care in Wellesley, Mass.
The Urban Institute also concluded in a study that the Massachusetts law did not end up being a job killer. While the study cites evidence that employers in Massachusetts reduced wages to help pay for the increased costs of coverage and shifted more of the direct costs of coverage onto employees, it did not end up in a reduction in jobs. It, therefore, concludes that “the evidence from Massachusetts would suggest that national health reform does not imply job loss and stymied economic growth.”
However, the Massachusetts law is not exactly like the ACA. In Massachusetts, the employer mandate only kicks in when a business has more than 11 employees and if such a business does not offer coverage, the fine is much less — only $295 per full-time equivalent — than the federal penalty.
The economic conditions are much different now than they were in 2006, as well, Graham said.
One thing everyone can agree on is there are still many unknowns about this law, with thousands of pages of guidance expected to be doled out from various government agencies, such as the IRS and the U.S. Department of Health and Human Services.
“My guess is these agencies aren’t taking any vacation for the next 12 months because there’s so much writing to do, so many regulations to wait for,” said Altholz.