ELLSWORTH, Maine — It’s time for business leaders to accept Obamacare and prepare for how their companies will face the slew of ensuing changes to the health care industry.
That was the key message in a Portland health insurance brokerage’s presentation Tuesday to Ellsworth’s business community.
But Rick Morrone, health and life director at Employee Benefits Solutions, said most businesses he has worked with haven’t gotten far: “Health care reform is coming. It’s complicated. I’m not sure what it means, and I haven’t done anything about it yet,” he said was the general consensus.
Morrone and Ellen McPherson, project and compliance manager for the company, spoke to a crowd of about 50 people at an event tailored for business owners. They said the time was now for businesses to begin planning how they will adapt to new rules in health care, such as the requirement for businesses with more than 50 full-time employees to provide health insurance or pay a penalty.
A similar event hosted by Eaton Peabody law firm was held late Tuesday morning in Bangor, which featured the same speakers and concerns from business owners about how the new law might affect their companies. That session drew more than 50 other business representatives.
McPherson said many businesses were waiting until the 2012 election results were in, thinking the health care law may change. Now that President Barack Obama has been re-elected, she said, Obamacare “is the law of the land.”
In a detailed slide show, McPherson showed how the new health care paradigm is a staggering assortment of regulations, qualifications, subsidies, exceptions and rules.
Most of the questions were from individual business owners curious not about how to implement the law, but about where their companies fit into rules that separate small businesses from large. (Under the law, companies with 50 or more full-time equivalent employees have a stiffer obligation to provide coverage or face a penalty.)
For example: How does the law determine who is and who isn’t a full-time employee? How do independent contractors factor into new rules about employer health insurance obligations? What about owner-operated businesses? How does overtime factor into the calculus of figuring how many workers a company employs?
“I can summarize this in a sentence: It’s complicated,” said Mark LeDuc, an aide to Sen. Susan Collins who helped her tackle the health care reform bill.
LeDuc said the senator opposed the bill because she and her aides didn’t believe it would accomplish its goal of affordable health care and felt the reform was so complex that it couldn’t be implemented effectively.
“Every time you think you have an answer, there’s a new question,” Lisa Martin, human resources manager for Wings for Children and Families, said while talking with other business representatives at the Bangor session about confusing aspects of the law.
Those complexities create an incentive for some businesses to stop offering insurance at all, Morrone said, opting instead to send their workers to the new health insurance exchanges created by Obamacare (“think Travelocity for health insurance,” McPherson said).
Other employers may choose to send their lower-income workers to the exchanges, where they’ll receive subsidies for health insurance. Even if the company incurs a penalty for not covering those workers, it may cost less than providing insurance.
“It’s not great, but it’s a reality,” Morrone said.
But LeDuc said employers may want to think twice before dropping their coverage.
“It’s really complicated,” he said. “I know a lot of employers are thinking: This is so complex. Why not throw up our hands and send workers to the exchanges?”
LeDuc said that once an individual is purchasing insurance on an exchange, disincentives for career advancement quickly appear. As the individual earns more money, their subsidy for health insurance shrinks. Once they hit 400 percent of the federal poverty level — about $43,000 for an individual — they “go over the cliff,” LeDuc said, and their subsidy disappears completely. The average job in Maine pays a salary of about $38,000, according to 2011 data from the Maine Center for Workforce Research and Information.
Subsidies on exchanges keep individuals from spending more than 9.5 percent of their income on health insurance. Once the “cliff” is hit, that rate can skyrocket up to nearly 20 percent.
“This is so dramatic that it will actually leave an individual worse off than when they made less money,” LeDuc said.
As individuals at the exchanges struggle with the competing interests of making more money and spending less on health care, LeDuc said, they will become harder to manage. They’ll think twice about working overtime, he said, or about taking a promotion that means more responsibility and more money.
“These employees will face consequences that will make it very difficult for you to manage your workforce,” LeDuc said.
LeDuc also said the headaches caused by sending workers to the exchanges should make companies, even small ones, consider offering good health insurance that will keep their workers away from the exchanges.
“Companies won’t escape this by dropping their plan down to the minimum or keeping their workforce under 50,” he said.
That’s how Dave Plowman, owner of Hampden-based PDQ Door said he might have to get around the new health care rules.
Plowman has 48 employees spread across six Maine locations. If he were to hire two more employees, he would pass the 50 employee threshold. This would make him a large employer and force him to spend $22,000 more per month on health care for his workers, he said.
“We may just never grow because it’s ridiculously expensive,” Plowman said.
Instead, he said, his company will either stay the same size or split into two separate companies — if that’s allowed.
Because most of his competitors have fewer employees, they have room to grow without being hit by the higher insurance costs, putting PDQ Door at a competitive disadvantage, according to Plowman.
Greg Molatch, an occupational therapist in Ellsworth, said his office has two other employees. Molatch said he would prefer a European-style single-payer health care system over the complexities of America’s model.
“We’ve taken this immensely competitive marketplace and tried to put a harness on it,” he said. “We’re trying to make a silk purse out of a sow’s ear.”
After the presentation Tuesday morning, Molatch said he is even less optimistic about health care reform than he was before. He said it’s unlikely he’ll try to offer insurance to his few employees.
Micki Sumpter, economic development director for Ellsworth, who organized the meeting in that community, said she would try to bring McPherson and Morrone back for another session to help businesses work out the kinks. But she reiterated the pair’s main message:
“All of us have been kind of waiting to see what happens,” she said. “But it’s time now to be proactive.”
For information on how the new health care reform law will affect your small business, visit http://www.dol.gov/ebsa.
Follow Mario Moretto on Twitter at @riocarmine.
BDN reporter Nick McCrea contributed to this report.