After years of heartache and hand-wringing, the Affordable Care Act’s infamous employer mandate has become reality with hardly a whimper.
“We got it all together, and we moved on,” said Jim Fris, chief operating officer of PJW Restaurant Group, the Haddonfield, N.J., operator of P.J. Whelihan’s Pub chain, which has three locations in the Lehigh Valley.
The mandate, requiring employers with the equivalent of 100 or more full-time workers to offer health insurance or pay a fine, took affect Thursday. It extends to employers with 50 or more workers in 2016.
Initially, the complexity of President Barack Obama’s signature health-care law was daunting, Fris said. So PJW Restaurant Group hired a large insurance company to help it understand the law and comply with its many requirements.
“The right guidance helped a lot,” he said. “To sit in the meetings with experts on the other side of the table, it was a relief.”
The employer mandate was one of the most controversial aspects of the 2010 law. Intended to discourage employers from dropping insurance after the government began providing subsidies to help low- and moderate-income Americans afford coverage, the mandate drew fire from opponents who said it would discourage business growth.
Nationwide, some businesses have reduced hours for part-time workers to less than 30 a week to avoid meeting the new legal threshold for full time — and having to offer health insurance.
Public employers, too, have responded to the pressure. In June, the East Penn School Board approved a two-year contract giving district nurses, instructional staff and administrative assistants small raises but reduced the hours of some from 32.5 to 29 hours. Then-Superintendent Thomas Seidenberger acknowledged the reduction was due to Obamacare.
And yet, the furor over the mandate seemed to fade as implementation grew nearer.
“We haven’t heard a lot,” said Tony Iannelli, president of the Greater Lehigh Valley Chamber of Commerce. “It has been quiet.”
The impact turned out to be less than feared since most businesses with 100 or more full-time employees already offered health insurance, he surmised.
“They don’t see it as a challenge,” he said.
PJW Restaurant Group, which has 17 restaurants and about 1,500 employees, played it safe, opting to extend its coverage to hourly workers such as bartenders and wait staff. However, many of the workers, who are relatively young, were already covered through their parents’ plans or simply didn’t want insurance, according to Fris.
“Not as many took it as we thought would,” he said, which reduced the company’s financial burden.
Under Obamacare, employers that do not provide insurance are supposed to pay a fine of $2,000 per employee above the first 30 full-time employees. The law defines full-time employment as 30 or more hours a week.
Employers may be subject to even bigger fines — about $3,000 per employee — if they offer substandard coverage that is then rejected by employees who qualify for government subsidies and buy individual coverage through the marketplace.
The bigger fines, however, could be rare, according to Todd Linn, a manager at Hampson Mower Kreitz Insurance in Bethlehem. For employers to be assessed a penalty, he noted, they must have pro-active employees — people who first would recognize that their employers are offering under-funded insurance and then would put forth the effort to shop for something better.
The law defines underfunded insurance as costing more than 9.56 percent of employee wages and covering less than 60 percent of the plan’s actuarial value.
“Your average, typical Joe isn’t going to know,” Linn said.
Pinch on small companies
While the mandate applies to bigger employers, ironically, small employers — those with fewer than 50 full-time employees — are experiencing some of the biggest changes under the law in the new year. Though they are exempt from the mandate, they must contend with fundamental changes to the way their insurance rates are calculated.
Traditionally, insurance carriers have been able to tailor rates by assessing a range of risk factors, including a business’ claim history, industry and demographics, such as the gender and family status of employees.
As of this year, however, such considerations are forbidden when determining rates for small businesses — as they will be in 2016 for medium-size businesses of 50 to 99 full-time employees. Instead, carriers consider a much smaller set of risk factors: essentially, where a business is located, the age of its employees and whether they smoke.
“When you do that, you are blinded to what the true cost will be,” said Nicholas Maxwell, an account executive with the Equinox Agency, an insurance provider in Fogelsville.
The change is meant to spread risk more evenly across the insurance pool. The result is lower insurance rates for some businesses and higher rates for others.
The construction industry, for example, has been hit particularly hard, Linn explained: Though the industry is filled with young men with “superman complexes” who seldom go to the doctor, contractors will have to pay virtually the same rates as other kinds of businesses, such as retailers, whose employees are more likely to avail themselves of medical services.
Unfortunately, more small businesses seem to be seeing their rates go up instead of down, said Linn, who mentioned a local excavating company that saw its insurance bill jump 53 percent. The company ended up canceling its coverage and giving its employees a stipend to shop for individual coverage at healthcare.gov., the Affordable Care Act website.
“Seventy-five percent of renewals have been horrible,” he said.
Hoping to avoid such a fate, DME Alliance, a small engineering design firm in Fogelsville, hired BSI Corporate Benefits of Bethlehem to help re-evaluate its health-care benefits from top to bottom.
“Nobody liked the imposition” of reevaluating, said Lynn Zeiner, business manager of DME, which has a payroll of about 20 workers. “It forced us to consider our options.”
But in the end, the exercise proved useful. DME decided to replace its existing insurance plan with a higher deductible plan that included health savings accounts. The firm is contributing enough money — $2,000 for individuals and $4,000 for families — to cover the entire deductible.
“We saved like 30 percent on our costs, and that included funding the [health savings accounts],” Zeiner said.
So far, employees seem satisfied, she added: “I’ve had no negative feedback.”
This article was written by Sam Kennedy from The Morning Call and was legally licensed through the NewsCred publisher network.
To learn more about health benefits, check out these articles:
- Health Insurance Is Important to You and Your Business
- Primary Types of Health Insurance
- The Company Sponsored Health Insurance Plan