Hit from health care concerns companies
Small businesses owners across Western Pennsylvania have been breaking out their calculators in recent months.
They've been trying to determine whether they'll be among the companies required to provide health insurance to their employees next year when the Affordable Care Act goes into full effect in less than nine months.
The insurance issue has stirred up some controversy — and confusion — because the government has redefined the rules for how companies classify employees as full-time workers and eligible for mandated medical coverage beginning in 2014.
Some employers have had difficulty trying to figure out how apply the definition. More worrisome is the possibility that they would have to pay for medical insurance for workers who previously had no coverage.
“I don't know of any employer who doesn't wish he could give all his employees insurance,” said Deb Doucette, secretary-treasurer of Pittsburgh restaurant company PIPA Group. “But you can't afford it.”
Companies such as PIPA Group, which owns the Clark Bar and Grill on the North Shore, Caffe Amante, Downtown, and Bistecca Steakhouse and Wine Bar at the Meadows Racetrack and Casino, are worried about the impact of providing insurance on their business.
The high cost of health care has made employee-sponsored insurance attractive for workers, but many go without coverage. The new law essentially requires employers to provide coverage to employees who work at least 30 hours a week or pay a fine.
Not every employer will be affected by the mandate. The law exempts small businesses with fewer than 50 employees. The calculators — and confusion — come into play because the Affordable Care Act doesn't just count the number of employees a business has, but arrives at a full-time-equivalent number based on the number of hours part-time employees work.
For the purposes of the law, anyone working 30 or more hours a week is a full-time employee, and two workers at 15 hours a week each are counted as one full-time-equivalent.
The Affordable Care Act was designed to expand access to health insurance. An estimated 30 million Americans could gain coverage for the first time next year either because their employer will be required to provide it or through online marketplaces set up and subsidized by the government.
In the long run, health care costs could be reduced as more people get access to routine and preventative medical services that keep them out of the emergency room. In the short term, companies are concerned about increased cost hitting their bottom lines.
“The cost to the economy and to those of us who have insurance is also steep. ... The uninsured add significant cost to our health care system,” said Neal Bisno, president of the SEIU Healthcare Pennsylvania union. “That's cost that we pay every year.”
Doucette crunched the numbers recently for PIPA. She arrived at 47 full-time-equivalents — just under the threshold.
“You don't want to cross the 50,” Doucette said recently from the Clark Bar, which leases space in the same building as the Pittsburgh Tribune-Review.
Being just below the threshold “makes you think about where you're going,” she said, regarding adding employees or building restaurants.
PIPA's situation illustrates a potential unintended consequence of the Affordable Care Act, experts say.
Employers below the threshold are likely to stem hiring to prevent going over it. Those with more than 50 FTEs and large part-time work forces, such as grocery stores and restaurant and retail chains, could cut hours for part-timers to avoid having to provide coverage. Once a company is required to provide health insurance, any employee working 30 hours or more a week must be covered.
“There's enormous incentive to go below that threshold,” said Robert Laszewski, president of Health Policy and Strategy Associates, an Alexandria, Va. consulting firm.
With the average cost of providing health insurance to a family at about $15,000 a year, “there's thousands of dollars of incentives for employers to watch that threshold,” he said.
About 27 million Americans work part time, or about one-fifth the nation's work force, according to the Labor Department. The numbers have grown since the recession of 2008 as employers cut costs.
Two-thirds of businesses with large numbers of part-time workers polled last year by consulting firm Mercer said that they were “more inclined to change their workforce strategy so that fewer employees meet that threshold” of working more than 30 hours a week.
But few employers are likely to publicize that cold reality, Laszewski said. Darden Restaurants, owner of the Red Lobster and Olive Garden franchises, and pizza chain Papa John's were the recipients of public backlash last year when they said they might cut hours for part-timers to avoid providing health coverage.
Not every restaurant owner is contemplating the downside of having to provide health coverage. Kevin Sousa, a chef and owner of Salt of the Earth in Garfield and the East Liberty eateries Station Street Hot Dog and Union Pig and Chicken, said he offers health coverage to all his employees and will continue the practice.
Sousa didn't know what his total employment figure was and hadn't calculated his number of full-time equivalents under health care reform.
“I feel it is important for our employees to have health care,” he said.
Once employees get to a certain age or have families, they'll leave an employer that doesn't provide insurance.
“You pretty much throw away your investment in that person,” he said. “It is an expense and a hefty expense” that outweighs the cost of provide health coverage.
Doucette might be worried about the impact of being required to provide insurance to her part-time workers, but she suggested another unintended consequence of health care reform: If more of her competitors offer coverage to part-time employees, she might have to do the same if she wants to hold onto to valuable employees.
While some might fret over the loss of working hours, Laszewski said part time workers that don't have insurance through a spouse are likely to find a good deal buying an individual plan through the online marketplaces known as insurance exchanges that are supposed to be up and running this year.
A single 28-year-old making $18,000 a year in a part-time job will receive a $252 a month government subsidy toward a $318 a month premium in the exchange, according to an estimate from the University of California at Berkeley.
People with lower incomes “will get better insurance from the exchange than through an employer,” Laszewski said.
Alex Nixon is a staff writer for Trib Total Media.
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