The Affordable Health Care Act will hit U.S. businesses hard next year. Or maybe it won't. Or maybe it will affect your business, but not the one down the street.
The law - commonly called "Obamacare" - requires that companies with 50 or more workers provide affordable health coverage for their workers. It sounds simple enough, but in reality, it's proven to be so complex that many business owners are unsure what the requirements are, how it will affect their bottom line or whether they even fall under its mandates.
Can they afford to offer health insurance to their employees? Should they be making changes to the insurance plans they do offer? Do they need to alter operations to either avoid the requirement or free up the money to meet it?
To help local companies get answers to some of their questions and cope with the law's requirements, the Colorado Springs Regional Business Alliance hosted "Health Summit 2013 - "Healthcare Reform: Make it Work for You!" last week. About 75 employers attended the summit, expressing their concerns over a number of issues, among them: the mandate itself and who is affected; the tax credits available to help small businesses afford health insurance for their employees; and the nitty-gritty points of the law.
Local business owners aren't alone in their confusion. According to the National Small Business Association's 2013 Mid-Year Economic Report on results of a summer survey of 1,100 small U.S. businesses, only 20 percent says they had a clear understanding of how the law will impact their business.
"It has been a challenge to figure out whether we are affected or not," says Tim Haas, president of TAT Enterprises Inc. of Colorado Springs, which has 145 workers - most of them seasonal.
The government has put off enforcement of the law until 2015, but premiums for 2014 are expected to rise sharply because of the law's requirements. In anticipation, some businesses are already changing the way they operate. They're putting off plans to expand and hire more people, or cutting back on some of the services their companies provide. Others are raising prices or cutting bonuses and employees' hours to get them below full-time status.
One of the more high-profile responses was announced last month, when UPS says it will drop coverage for about 15,000 of 33,000 spouses of nonunion employees in the U.S. who can get coverage through their own employers. Spouses who can't get coverage through their jobs can stay on the UPS plan.
Other companies are considering a similar move. A survey released in August by consulting firm Towers Watson found 25 percent of employers have taken steps to discourage spouse coverage; that number is expected to rise to 32 percent next year.
Still, most employers plan to continue offering health care coverage rather than pay a penalty for not offering coverage, says Leo Tokar, senior vice president in Denver for Lockton Cos., a Kansas City, Mo.-based insurance brokerage and employee benefits consulting company.
Nearly three-fourths of 125 Colorado employers surveyed by the company last year says they were not anticipating dropping employee health insurance coverage once state health insurance exchanges begin offering coverage to individuals in 2014. The finding is backed by the recent National Small Business Association report, which found that among employers with 50 or more employees. 73 percent planned to continue offering health insurance, while just 2 percent planned to pay the penalty. One-third of smaller businesses weren't sure what they would do to comply.
"There is a small increase in mandated benefits next year (from the ACA), but on the whole it is manageable," says Tokar, who moderated the business alliance panel discussion. "It will add costs in the short-term and add challenges to already-strained health care budgets, but employers can usually find ways to manage the cost by restructuring their benefit plans. By taking pieces from different buckets, they can find ways to offset some or all of the costs of health-care reform."
The NSBA survey found that 40 percent of businesses had increased deductible levels on health care coverage and 36 percent increased the share of the monthly premium employees pay.
But most businesses appeared to be holding off on making major changes to their operations or plans for the future. The NSBA survey found that only 20 percent have held off on implementing a growth strategy because of rising health care costs. Thirty-six percent says they had refrained from raising salaries and 26 percent have held back on hiring.
Some businesses are trying to get around the law by hiring part-time employees. According to jobs figures released last week by the Colorado Department of Labor and Employment, a surge in job growth appears to be coming primarily from the addition of part-time jobs.
"It makes sense that employers are adding part-time workers instead of full-timers to avoid the federal mandate," said Tim Binnings, a senior partner with Summit Economics LLC, a Colorado Springs economic research and consulting firm.
Teresa Hartnett, owner of a small business in Alexandria, Va., is making a dramatic change in course because of the ACA. She planned to transition from nearly 30 free-lancers to a full-time staff of 60 by 2014 because her business was doing so well. Then she met with her accountant and realized she might not be able to afford to carry out her plan.
She considered expanding her company with part-timers who wouldn't be covered under the law, or keeping her staff below 50. But none of those options would help her meet the goals she set for her business.
"I couldn't even figure out what health care I could offer without it being a problem," says Hartnett.
Her solution was to stay a very small business, with just a handful of freelancers. She's turning down offers of business.
"'I'm going to ratchet it down for a while,'" she says.
Barbara Morris has 48 employees at her Dallas-based company, Laser Image. She's hoping to hire more staffers, and knows that if she does, that will force her to comply with the ACA.
"We know it's going to be a large item to add to our bottom line. And we keep talking about that, how do we make up for that?" says Morris, whose company creates digital sales and marketing systems.
One answer may be to reduce employee bonuses.
"Perhaps the bonus won't be 5 percent. Perhaps we'll cut it to 3 percent to put money away for health care," Morris says.