Neil Crosby, director of sales for Warner Pacific Insurance Services, had surpassed 500 when he lost track of the number of presentations he has given on the new federal health care law.
Addressing apprehensive audiences, Crosby tests their understanding of the challenges businesses face as they scramble to digest and meet the requirements of the Affordable Care Act. When he asks whether there is anything that requires them to provide health care for their workers, they reply, “Yes.”
“Actually, there isn’t,” Crosby said in a recent interview. “But, if you have 50 or more employees and you don’t, you are going to eventually face a penalty.”
Two weeks before the state begins enrolling people in its insurance marketplace, businesses small and large are researching and retooling their health care offerings as they struggle to tamp down costs. Under the new law, nearly all Americans will have to carry health insurance or pay a penalty.
“There are so many unanswered questions, so many provisions coming at them,” Crosby said. “They don’t know which way to turn. Some are just putting their head in their hands and saying, ‘God, can I just run my business?’”
Covered California, the state’s health insurance exchange, has begun offering a raft of competitive options for small businesses. The agency’s portfolio includes preferred provider networks and health maintenance organizations. Among the incentives for offering health coverage are tax credits available to businesses with fewer than 25 full-time equivalent employees who are paid less than $50,000 a year on average.
The businesses also must contribute at least 50 percent toward their employees’ premium cost.
In California, nearly 3.5 million small businesses are working to get up to speed. Some advocates fear companies will run a cost-benefit analysis and decide to pay the financial penalty because coverage costs are too high and they don’t qualify for premium assistance.
Surveys show that small-business owners expect the health care law to increase the cost of employee benefits.
“No matter how you slice it, they will be paying more for insurance than they have before. But the coverage will be more comprehensive and robust,” said Katie Vlietstra, director of government affairs for the National Association for the Self-Employed.
Angelica Pappas, with the California Restaurant Association, said the organization has ramped up its education and outreach efforts on the law, with publications geared toward operators and employees. She said some frustration from members receded earlier this summer when the White House delayed the so-called employer mandate until 2015, citing business concerns and complicated reporting requirements.
“What we are telling them is to use this next year to try out what they are considering,” Pappas said.
Still, the delays have taken a toll.
Manuel Cosme Jr., the owner of Professional Small Business Services Inc. in Vacaville, rattled off a list of requirements that came and went and will eventually return: auto-enrollment of employees, mandatory W-2 reporting requirements and maximum out-of-pocket spending limits.
Cosme, whose firm provides payroll, bookkeeping and income tax services, stopped offering health insurance to employees he previously covered because it became too expensive. He said he often is stumped now when approached by a client.
“At this point, I cannot advise because the rules keep changing,” said Cosme. “What may be a factor today may not be tomorrow.”
In response to the changing marketplace, many of the country’s largest employers regularly alter health plan offerings. This year is no different.
Large employers must wait several years before becoming eligible for state insurance exchanges. Nevertheless, some believe certain segments of their workers could benefit immediately from signing onto a state exchange, according to a survey released last month by the National Business Group on Health.
“What you are seeing is a little bit of running out of the easy ways to make (cost-saving) changes,” said Helen Darling, president and chief executive of the nonprofit, which represents 265 large U.S. employers.
One solution is no longer covering employee spouses on a company’s health plan. The United Parcel Service is doing just that, dropping coverage for 15,000 spouses who have coverage through their own workplaces. UPS said the change is meant to offset an expected 4 percent rise in health costs resulting from the Affordable Care Act. Such moves help companies save on annual premiums as well as various new fees.
Darling said the trend toward eliminating spousal coverage has yet to fully take hold. “But I do think that it’s the future,” she said.
The survey of large businesses showed that more are turning to consumer-directed health plans such as health-savings accounts. The plans are designed to cut spending by subjecting employees to the true costs of their treatment decisions. Overall, the businesses projected that their health care costs would increase by 7 percent, the survey said.
Companies are coping in different ways.
Trader Joe’s, the popular chain of grocery stores, has said it will cease offering health benefits for part-time workers next year. Instead, employees who log 30 hours a week or fewer would receive $500 a year to help them purchase their own insurance.
After giving scores of lectures, Crosby has heard some creative business solutions to the changes talking place. A trio of neighboring growers discussed the possibility of rotating their workers – each group for four months a year – to be able to continue classifying the laborers as “seasonal” and avoid providing them benefits or paying the penalty.
As for the question he typically poses to employers, Crosby said he now takes a more proactive approach after hearing their replies. He said those who expect to simply pay the penalty could be shocked when the federal government increases the financial toll.
If companies decide to increase employee pay in lieu of providing health care, their tax liability would rise, he said. Workers’ compensation costs also could soar. And workers may decide not to use the stipends for health care.
More important, Crosby said, employees like receiving their benefits.
“Look, you don’t have to do this,” he said. “But you do because you are trying to take care of your employees.
“That’s not going to change.”