There’s a countdown on inside the human resources departments and executive offices of businesses of every size. Others call it a ticking time bomb that could rock the U.S. economy.
Either way, all eyes in the business world are locked on 2014. The date when many of the new employer health insurance rules under the Affordable Care Act — aka Obamacare — kick in.
Laced within the health care law’s 2,000 pages — along with the reams of regulations that have been added since then — are various incentives and disincentives that could cause some businesses across the country to act in seemingly strange ways.
For example, a fast-growing small business racking up profits and burning up its balance sheet could all of a sudden slam the brakes on hiring as the firm approaches its fiftieth full-time employee.
Why? Because that’s the threshold when the regulations of Obamacare would apply to this theoretical small business. Some argue that an otherwise-growing businesses could choose to artificially restrain its forward momentum, curtailing or ceasing its hiring patterns. All to avoid falling under the insurance strictures of Obamacare.
Others counter just as forcefully that no growing business with a green light from the market is going to voluntarily pull in its horns and leave business — and profits — on the table for a competitor to scoop up. The relentless drive of capitalism will prevail, even under the new mandates of Obamacare, these people insist.
They say businesses large and small are still going to want to serve their markets, satisfy their customers and soak up additional share from their competitors — regardless of Obamacare. After all, it’s still business.
Beyond the 50-employee threshold, there is a huge business debate over full- and part-time work. And those who would know insist that intense planning around this issue is already occurring inside staffing meetings at companies in some sectors.
It’s a thorny discussion over employee hours. And the dividing line between full-time employment and part-time work — already exacerbated by the recent recession and spotty recovery — could be about to get worse on account of Obamacare.
All because the health care law’s mandates to either provide employees with health insurance or pay a per-employee penalty to the government only apply to full-time employees.
Employers with more than 50 full-time employees get a pass from Obamacare when it comes to insuring their part-time staff. Yet, the unintended consequence of the law might be that more and more would-be full-time employees in some sectors are shifted to part-time status.
At first blush, paying a $2,000 fine to save $12,000 in annual employee benefit costs seems like a business no-brainer. It’s possible under Obamacare.
And workers — especially those infood service and low-wage retail jobs – could see their hours cut dramatically as companies move to adjust to this new rule. All, to keep part-time employees’ hours under the 30-hour-per-week average defined in the health care law.
Thus, not only would these employees still not receive health insurance from their employers, they’d now be working less hours in order to keep them under the magical 30-hour-a-week threshold. Without this clause of the health care law, these employees might be working far longer and earning more, some say.
Almost certainly, there will be more part-time jobs across America. Both, because some employers will slash hours to keep employees under the part-time threshold and because they will have to hire more part-timers to continue to run their businesses, the experts say.
Indeed, it’s already happening in the restaurant industry, with national chains like Darden Restaurants — operator of Red Lobster and Olive Garden — making similar announcements.
Then there’s the tenant of Obamacare that holds the potential to upset the current balance of health insurance benefits between employers and employees. In the health care industry, it’s known as the dumping penalty.
Under the law, employers, regardless of how big they are, could opt to pay an annual fine of $2,000 per full-time employee in order to be freed from providing that employee with health insurance.
In raw numbers, the potential savings could be significant. Consider that the average employee healthcare benefit costs a company between $6,000 to $12,000 annually, depending on the plan and the employee’s family status.
At first blush, paying a $2,000 fine to save $12,000 seems like a business no-brainer. But many experts point out that health care benefits are part of the overall compensation package that enables employers to attract — and keep — good workers.
What’s more, health care benefits aren’t taxed as a form of compensation. The employee benefits from this, but so does the employer.
To attract that same employee without offering a health care plan, the employer wouldn’t just need to pay the worker $12,000 more, so he could go out and purchase the same coverage on his own. Because wages are taxed at ordinary income rates, the employer would have to pay about 20 percent on top of the additional $12,000 to keep this employee whole.
The company also would owe payroll taxes on this additional compensation. And this employer no longer offering insurance also would owe the $2,000 annual fine for each and every employee it no longer insures.
Most experts agree that there shouldn’t be a wave of employers opting to pay the penalty and thereby dumping their employees from company health care plans. Not at first, at least.
But some experts say all it takes is one company making the move to ignite a trend that could reverberate throughout an entire industry or business sector.
Again and again, expert after expert is quick to say that we will have to wait and see how Obamacare and all its intended and unintended consequences play out in the business world.
What we don’t have to wait on — what is already abundantly clear — is that Obamacare will raise health insurance premiums next year. The average projected increase in premiums just from Obamacare’s new taxes and fees is pegged at 7 percent in 2014, according to insurance experts.
Not too bad, one might say. But then consider this: That 7 percent increase from the new health care law is on top of the 8 percent to 10 percent annual increase in core health care costs.
So the real hike for 2014 could be an increase in healthcare premiums of around 17 percent, according to various experts.
“All I’ve seen is extra costs right now,” said Rob Glus, a consulting actuary and chair of Conrad Siegel in Harrisburg. The firm advises firms of 100 employees and larger all across Pennsylvania on their health care and benefit plans.
Needless, to say, Glus has been busy of late. And he’s been getting an earful from some employers.
“If I’m an employer, all I’ve seen is extra regulations and added costs,” Glus added, repeating the mantra he’s heard all too often this year from Pennsylvania companies.
But even he isn’t sure of all that Obamacare holds in store.
“This thing is going to have to play out for a few years to see if this is going to accomplish what it set out to accomplish, which is broader access to healthcare insurance,” he said. “It’s difficult. Granted, what everybody sees right now is extra costs. That obviously puts a sour taste in people’s mouths. We’re going to have to be patient. We’re going to have to let it play out and settle down. Then, we’ll know whether it actually is going to work or not.”
So what do you say? How will Obamacare impact business and the economy? How will it affect your company? What will it mean for your job?
Through Wednesday, PennLive will be exploring the possible economic ramifications of Obamacare in full detail. We’ve reached out to area business leaders, statewide business groups, healthcare insurance companies and healthcare providers. And we’ll be sharing their views on Obamacare in a series of posts targeting specific business issues raised by the healthcare law.
But we want to hear from you, too. Especially if you own a mid-sized company or a small business. How will Obamacare impact your business decisions?