Archive | Employers Reaction to Bill

Obamacare Delay That Boosts Business Concerns Workers

While businesses hailed President Barack Obama’s decision to delay penalizing companies that fail to offer benefits under the health law, workers and states may struggle with the uncertain aftermath.

  • In postponing the mandate for a year, the president has lessened the need for employers to provide coverage or improve on skimpy benefits, and opened questions about who may be eligible for U.S. subsidies being offered in the online insurance exchanges now being created under the law.

For employers, “this is relieving, temporarily, a burden,” said Joseph Antos, a health economist at the nonprofit American Enterprise Institute in Washington. “The usual question is, well, who is harmed?”

The administration, in a blog post July 2, said it would release guidelines next week that it hoped would clarify enforcement of the Affordable Care Act rule going forward.

The delay was welcomed by economists, who saw uncertainty over the law as a drag on hiring.

“I see this as a reason to take a pretty big sigh of relief for the near-term economic outlook,” said Stephen Stanley, chief economist at Stamford, Connecticut-based Pierpont Securities LLC. “There were a lot of firms that probably were just not doing anything because they had no clarity on what labor costs were going to be next year.”

30 Hours

Under the provision, companies with 50 or more workers face a fine of as much as $3,000 per employee if they don’t offer affordable insurance. The rule covers those working 30 hours a week or more. Valerie Jarrett, a senior Obama adviser, said in a blog post announcing the move that the administration decided on the delay so officials could simplify reporting requirements.

While surveys suggested the mandate wasn’t deterring most businesses, the administration has faced a steady stream of reports about employers limiting hours or holding off on hiring. Employees at Darden Restaurants Inc (DRI)., owner of the Olive Garden and Red Lobster chains, who work fewer than 30 hours a week will be considered part time and won’t be offered insurance, Bob McAdam, the company’s senior vice president of government and community affairs, said in a phone interview. The company expects about 75 percent of its workforce to remain part time, he said.

The one-year postponement “could help boost payroll growth,” Maury Harris, a New York-based economist at UBS, said in a research note to clients. “For those employers on the cusp of the 50-employee threshold, this delay may prompt them to hire as they may be unwilling to continue to postpone hiring” to avoid offering benefits.

Payroll Growth

U.S. payrolls have been growing this year, with the economy adding 175,000 jobs in May and 149,000 in April, according to the Labor Department. The unemployment rate climbed 1/10th of a percentage point last month to 7.6 percent as more Americans entered the workforce. The government will report job growth for June on July 5.

Still, the delay may do little for hiring, said Amanda Austin, director of federal policy for the National Federation of Independent Business, a Washington trade group that calls itself “the voice of small business” in the U.S.

“Businesses like to plan for more than a year out,” she said in a telephone interview. “If they were looking at a plan to put in place for this, they will probably continue on with it. Just one year is not going to provide substantial relief.”

The downside could come for Americans lacking insurance coverage, said Rich Umbdenstock, president of the Chicago-based American Hospitals Association.

‘Shared Responsibility’

“The goal of the ACA was to extend coverage to the uninsured, which required a shared responsibility from all stakeholders,” he said in a statement. “We are concerned that the delay further erodes the coverage that was envisioned.”

Without the penalties, the U.S. government may lose as much as $10 billion in revenue next year, the amount expected to be generated according to congressional estimates.

The White House suggested the impact of the decision would be limited. Ninety-eight percent of workers in firms with 50 or more employees worked for a company that offered health coverage to at least some of its employees in 2012, according to the Kaiser Family Foundation’s Employer Health Benefits Survey.

In March, meanwhile, a survey of large employers found 84 percent said they were unlikely to cut part-timers’ hours to avoid the mandate, according to Towers Watson & Co (TW)., the New York-based benefits adviser that conducted the research. Small employers were a different matter: An April poll by Gallup found 41 percent said they had backed off on hiring due to the law and 18 percent said they would have to cut workers’ hours.

Existing Requirements

Other requirements for businesses will remain in effect, said J.D. Piro, leader of the health-law group at benefits consultant Aon Hewitt, in a telephone interview.

Companies still must offer insurance to their workers’ children until age 26, and they must pay a minimum of 60 percent of medical bills and provide preventive health services, including birth control, without cost-sharing by employees, Piro said. Those provisions carry $100 daily fines per violation.

The delay “only applies to the employer mandate,” Piro said. “It doesn’t apply to any other part of the act.”

The individual mandate, a linchpin of the law that requires most Americans to carry health insurance, also remains in effect. So, too, will the online insurance exchanges, which are expected to sell subsidized health plans to some 7 million people next year.

More Difficult

While the Obama administration said the exchanges were on track to open for enrollment at the law’s Oct. 1 deadline, the delay promises to complicate their operations, said Kevin Counihan, executive director of the state of Connecticut’s exchange, in a telephone interview.

Government subsidies for uninsured people who buy coverage through the exchanges are supposed to be available only for those not offered affordable health insurance on the job. The markets will now have to figure out how to verify eligibility without employers reporting their benefits, Counihan said.

The government could demand subsidies back from consumers when they file tax returns in 2015, although that might produce a political “horror show,” he said.

Counihan said he was waiting to see what the administration proposes in follow-up regulations.

“There’s going to clearly be confusion about this,” he said. “There’s going to be a percentage of the population that also thinks that the whole thing has been delayed by a year.”

*Modified from an Insurancebroadcasting.com article

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ObamaCare employer mandate delayed until after 2014 midterms

The ObamaCare employer mandate requiring businesses to provide their workers with health insurance will be delayed by a year, the administration said Tuesday in a stunning announcement.

  • Delaying the requirement until 2015 is an enormous victory for businesses that had lobbied against the healthcare law. It also means that one of healthcare reform’s central requirements will be implemented after the 2014 midterm elections, when the GOP is likely to use the Affordable Care Act as a vehicle to attack vulnerable Democrats.
  • Many employers had threatened to cut employees’ hours to avoid the new requirements. Employers had also complained about the mandate’s reporting provision. Rules on the requirement came out this year, leaving little time for businesses to respond and prepare.

In a White House blog post, senior adviser Valerie Jarrett wrote that the administration believed it needed to give employers “more time to comply with the new rules.”

“This allows employers the time to test the new reporting systems and make any necessary adaptations to their health benefits while staying the course toward making health coverage more affordable and accessible for their workers,” Jarrett wrote Tuesday evening.

Jarrett also wrote that the delay would help in “cutting red tape and simplifying the reporting process.”

“We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination,” Jarrett said. “So we plan to re-vamp and simplify the reporting process.”

The Treasury Department’s announcement does not affect the individual mandate, which requires most taxpayers to either purchase insurance or pay a penalty, and administration officials said on Tuesday that other aspects of the law wouldn’t be delayed.

The law’s critics quickly framed that as a double standard, accusing the administration of acknowledging the law’s complexity for businesses without offering a similar break to the individual workers who still have to buy insurance. The employer mandate affected businesses with more than 50 workers.

“That the Obama administration is putting off this job-killing requirement on employers, but not individuals and families, shows how deeply flawed the president’s signature domestic policy achievement is,” said Sen. Orrin Hatch (Utah), the ranking Republican on the Senate Finance Committee.

“While a delay of this mandate is welcome news since it shows the challenges the employers are facing complying with it, a delay — conveniently past the 2014 election — only adds to the uncertainty these job creators face because of ObamaCare,” Hatch said.

Other Republicans seized on the news, arguing that the delays suggested the law was a “train wreck” and that Democratic candidates in 2014 would have difficulty explaining the delay.

Speaker John Boehner (R-Ohio) and House Majority Leader Eric Cantor (R-Va.) renewed their calls for repealing the law in full.

“This further confirms that even the proponents of ObamaCare know it will hurt jobs, decrease economic growth and make it harder for families to have access to quality and affordable health care,” Cantor said in statement.

“Rather than continuing to delay the predictable pain until another Election Day has passed, we should scrap this entire law and instead implement patient-centered reforms before any more damage is done,” he said.

Some Democrats had openly fretted about the law’s implementation.

While GOP leaders were quick to react, hammering the delay as evidence that the law is unworkable, Democratic leaders were quieter Tuesday evening. One exception was Democratic National Committee Chairwoman Debbie Wasserman Schultz (Fla.), who tweeted that the decision shows Obama is “in it for long haul to fully implement” the healthcare law.

Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid (D-Nev.) said the administration was showing “a willingness to be flexible.”

“It is better to do this right than fast,” said Jentleson in a statement.

Sen. Max Baucus (D-Mont.), one of the primary architects of the healthcare law, warned in April that small businesses were struggling to come to grips with their new responsibilities.

“Small businesses have no idea what to do, what to expect,” Baucus told Health and Human Services Secretary Kathleen Sebelius at a hearing.

“I just see a huge train wreck coming down,” Baucus said.

The U.S. Chamber of Commerce praised the delay.

“The administration has finally recognized the obvious: Employers need more time and clarification of the rules of the road before implementing the employer mandate,” said Randy Johnson, the Chamber’s senior vice president for labor, immigration, and employee benefits.

“The Chamber has testified numerous times about the problems with the mandate, and we applaud the administration’s step to delay this provision. We will continue to work to alleviate this and other problems with ObamaCare.”

“I hope that this means that employers who have been cutting employees to part-time will now call them back to full-time employment, but regret that the administration is delaying the implementation of an important provision of the ACA,” said Timothy Jost, a law professor at Washington and Lee University and a strong supporter of the healthcare law.

The change will likely mean that more people buy individual coverage through the law’s new insurance exchanges, which are supposed to be open for enrollment by Oct. 1.

If fewer employees have access to coverage through work, at least some are likely to turn to the exchanges for coverage and the tax credit that helps cover the cost.

Hatch said he hoped that was not the administration’s goal, stating it could be a “back door attempt at getting more Americans into the exchanges, which have been plagued by problems.”

More people on the exchanges would also mean greater federal spending on the tax subsidies, increasing the law’s total cost.

Sabrina Corlette, a health policy expert at Georgetown University, said the move could be a boon to consumers because plans on the exchanges will be stronger than those offered by many employers. She worried, however, that the employer mandate could be deferred again down the line.

“Anyone that’s been around politics long enough knows to be a little bit concerned,” Corlette said. “If a one-year delay is OK, how about a two-year delay? How about a three-year delay?”

The political effects of the delay could be more severe than the effect on the law’s expansion of healthcare coverage. One vulnerable Democrat, Sen. Mark Begich (Alaska), hailed the decision.

“I’m pleased the administration is listening to me and the many businesses that are concerned about the complexity of the new requirements,” said Begich, who is facing reelection in 2014.

In its most recent estimates before the delay was announced, the Congressional Budget Office said the number of people with employer-based coverage was not expected to change next year.

The penalty for employers that failed to offer coverage was also not expected to bring in any money next year, according to the CBO’s latest estimates.

The delay gives employers a free year to dump their workers into the law’s insurance exchanges, former Congressional Budget Office director Douglas Holtz-Eakin said.

“Essentially for calendar 2014, the act of dropping coverage and dumping employees into the exchanges is on sale,” he said. “Drop and dump, but no penalty.”

*Modified from a Hill.com article

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Think NSA Spying Is Bad? Here Comes ObamaCare Hub

The Health and Human Services Department earlier this year exposed just how vast the government’s data collection efforts will be on millions of Americans as a result of ObamaCare.

  • Sen. Max Baucus, D-Mont., asked HHS to provide “a complete list of agencies that will interact with the Federal Data Services Hub.” The Hub is a central feature of ObamaCare, since it will be used by the new insurance exchanges to determine eligibility for benefits, exemptions from the federal mandate, and how much to grant in federal insurance subsidies.
  • In response, the HHS said the ObamaCare data hub will “interact” with seven other federal agencies: Social Security Administration, the IRS, the Department of Homeland Security, the Veterans Administration, Office of Personnel Management, the Department of Defense and — believe it or not — the Peace Corps. Plus the Hub will plug into state Medicaid databases.
  • And what sort of data will be “routed through” the Hub? Social Security numbers, income, family size, citizenship and immigration status, incarceration status, and enrollment status in other health plans, according to the HHS.
  • That filing describes a new “system of records” that will store names, birth dates, Social Security numbers, taxpayer status, gender, ethnicity, email addresses, telephone numbers on the millions of people expected to apply for coverage at the ObamaCare exchanges, as well as “tax return information from the IRS, income information from the Social Security Administration, and financial information from other third-party sources.”
  • They will also store data from businesses buying coverage through an exchange, including a “list of qualified employees and their tax ID numbers,” and keep it all on file for 10 years.
  • In addition, the filing says the federal government can disclose this information “without the consent of the individual” to a wide range of people, including “agency contractors, consultants, or grantees” who “need to have access to the records” to help run ObamaCare, as well as law enforcement officials to “investigate potential fraud.”

“The federal government is planning to quietly enact what could be the largest consolidation of personal data in the history of the republic,” noted Stephen Parente, a University of Minnesota finance professor.

Not to worry, says the Obama administration. “The hub will not store consumer information, but will securely transmit data between state and federal systems to verify consumer application information,” it claimed in an online fact sheet .

Rep. Diane Black, R-Tenn., complained that just months before ObamaCare officially starts, the Obama administration still hasn’t answered “even the most basic questions about the Data Hub,” such as who will have access to what information, or what training and clearances will be required.

Beyond these concerns is the government’s rather sorry record in protecting confidential information. Late last year, for example, a hacker was able to gain access to a South Carolina database that contained Social Security numbers and bank account data on 3.6 million people.

A Government Accountability Office report found that weaknesses in IRS security systems “continue to jeopardize the confidentiality, integrity, and availability of the financial and sensitive taxpayer information.”

A separate inspector general audit found that the IRS inadvertently disclosed information on thousands of taxpayers between 2009 and 2010. In 2011, the Social Security Administration accidentally released names, birth dates and Social Security numbers of tens of thousands of Americans.

If these government agencies can’t protect data kept on their own servers, how much more vulnerable will these databases be when they’re constantly getting tapped by the ObamaCare Data Hub?

In any case, creating even richer and more comprehensive databases on Americans will create a powerful incentive to abuse them among those looking to score political points by revealing private information or criminals who want to steal identities.

A recent CNN poll found that 62% of Americans say “government is so large and powerful that it threatens the rights and freedoms of ordinary Americans.”

*Modified from an IBD.com article

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Will Obamacare Hurt Jobs? It’s Already Happening, Poll Finds

Small business owners’ fear of the effect of the new health-care reform law on their bottom line is prompting many to hold off on hiring and even to shed jobs in some cases, a recent poll found.

“We were startled because we know that employers were concerned about the Affordable Care Act and the effects it would have on their business, but we didn’t realize the extent they were concerned, or that the businesses were being proactive to make sure the effects of the ACA actually were minimized,” said attorney Steven Friedman of Littler Mendelson. His firm, which specializes in employment law, commissioned the Gallup poll.

  • “If the small businesses’ fears are reasonable, then it could mean that the small business sector grows slower than what economic conditions otherwise would indicate. And small businesses have been a growth engine in the economy,” Friedman told CNBC.
  • Forty-one percent of the businesses surveyed have frozen hiring because of the health-care law known as Obamacare. And almost one-fifth—19 percent— answered “yes” when asked if they had “reduced the number of employees you have in your business as a specific result of the Affordable Care Act.
  • The poll was taken by 603 owners whose businesses have under $20 million in annual sales. Another 38 percent of the small business owners said they “have pulled back on their plans to grow their business” because of Obamacare.
  • The prevalent pessimism tracks other answers in the poll, which showed that 55 percent of small business owners believe that the ACA will lead to higher health-care costs. By contrast, about 5 percent said the law would lead to lower costs.
  • Just 9 percent of the small employers surveyed agreed that Obamacare would be “good for your business,” while another 39 percent saw “no impact.”
  • In addition to restricting hiring or cutting jobs, small companies are considering other ways to mitigate the expected financial fallout. Twenty-four percent are weighing whether to drop insurance coverage, while 18 percent have “reduced the hours of employees to part-time” in anticipation of the ACA’s effects, the poll found.

Those are “some pretty startling answers,” Friedman said.

“To think that [nearly] 20 percent of small businesses have already reduced the numbers they have in their business because they’re concerned about the medical coverage is significant, and a bit troubling,” Friedman said.

Friedman said that Littler Mendelson, which recently created a health-care reform consulting group, had heard small business clients talk about their fear that the rules and other effects of the ACA will lead to higher costs. The poll supported that anecdotal data with the finding that 48 percent of owners think the law will be bad for their bottom line.

And more than half—52 percent—said they expected a reduction in the quality of health care under Obamacare, while just 13 percent expected an improvement.

“I can’t say that the fears appear overstated, because the potential for big problems seems rather large,” Friedman said about law’s implementation.

“We don’t know until 2014 and beyond what the impact of the ACA will be on businesses,” he said. “There is tremendous fear that the premiums will be much higher, for small businesses especially. At this point we can’t look a client straight in the eye and say, ‘Don’t worry about it. Everything will be fine.’ ”

Gallup Chief Economic Dennis Jacobe said small business owners’ answers in the poll “is consistent with owners’ tendency to be more Republican than Democratic, higher-income, more against big government, more conservative and less optimistic than Americans overall.”

*Modified from a CNBC.com article

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What to Expect of the Small-Business Insurance Exchanges

Looking to buy a small group plan from your state’s new health-insurance exchange? There’s a risk it won’t be ready to open on time in October.

  • Eleven percent of 783 firms with less than $20 million in annual revenue said that their biggest concern regarding the health-care law is how the insurance exchanges will operate, according to an April survey by The Wall Street Journal and Vistage International Inc., a San Diego-based executive-mentoring group. That compares with 33% who said the cost of health care is their top concern.

If you own a small business and are looking to purchase a small-group plan from your state’s exchange, here’s what you need to know:

Is my small business eligible to buy insurance from an exchange?

  • The exchanges are limited to only businesses with 100 or fewer full-time-equivalent employees. Full-time equivalent is the number of employees on full-time schedules plus the number of employees on part-time schedules, converted to a full-time basis.

How would an exchange benefit my business?

The small-business exchanges are expected to make it easier for small employers to manage their health-benefits programs. An employer could make a single payment to an exchange, which would disburse the money to the various insurance providers covering its staff, among other benefits.

Also, small group plans purchased through an exchange could be less expensive than what’s available in the private marketplace. This is because the exchanges are expected to attract a large pool of participants, which theoretically would create more competition among insurers, thus resulting in lower insurance premiums.

Husband-and-wife business owners Chris and Maria Guertin of Minneapolis are among those hoping to find a small-group insurance plan within their budget through their state’s exchange. They say they currently can’t afford one to cover themselves, their one full-time employee and any recruits they hire in the future for Sport Resource Group Inc., a retail and wholesale company they started in 2006. But they would like to be able to offer health insurance as an employee benefit to attract and retain top talent in order to grow the business. “A group plan right now is too much,” says Mr. Guertin.

Who’s running the exchanges?

Seventeen states are running their own small business exchanges, with the federal Centers for Medicare and Medicaid Services carrying out the task on behalf of the remaining 33 states.

What kind of plans will the exchanges offer?

The exchanges will offer insurance plans from private insurance companies. For 2014, employers in states where the federal government is running the exchange will be able to select just one plan to offer to workers. Which carriers will be participating and how many will vary by state.

When will I be able to start using my state’s exchange?

  • Though enrollment is slated to begin in October of this year, with plans to take effect in January 2014, the GAO report suggests they may not open in time. The 17 states running their own exchanges were late on an average of 44% of key activities that were originally scheduled to be completed by the end of March, it said.

There have been other setbacks as well. The federal government said in April that contrary to initial plans, it wouldn’t allow workers in the first year to choose between a range of insurance options offered through employers. For the first year, companies will select one plan to offer to workers.

Can I get a tax credit?

If you have fewer than 25 full-time equivalent employees, you may qualify for a tax credit of up to 35% of your premium costs this year and up to 50% in 2014.

Do I even need to buy a small-group plan?

Once your firm reaches 50 full-time equivalent employees, a penalty will kick in if you fail to provide coverage for employees who average 30 or more hours a week in a given month, starting in January. The penalty is $2,000 for each full-time employee in excess of 30 full-time employees. There are no penalties if part-time employees are not offered coverage. The government will rely on data about the composition of employers’ workforces this year in order to determine whether a firm will be liable.

Also, if an employer with 50 or more full-time equivalent employees does offer coverage, but the insurance doesn’t meet the law’s minimum requirements, there is a penalty of $3,000 for each worker who gets a federal subsidy through state insurance exchanges.

*Modified from a WSJ.com article

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Health Benefits Come Under Knife Ahead Of ObamaCare

Spending on health benefits in service occupations and among small firms exposed to ObamaCare mandates shrank over the past year, new Labor Department data show.

  • Although employers face penalties in 2014 if they fail to offer affordable coverage, this decline in spending on health benefits shows that they’re finding ways to shift some of ObamaCare’s looming costs back to the government. Strikingly, Bureau of Labor Statistics data show that health benefit increases came to a standstill in service occupations after the first quarter of 2010 — when ObamaCare became law.
  • Prior to that, benefit costs had grown steadily since the mid-1990s. But following ObamaCare’s passage, health benefits per hour of work in service occupations grew 0% through March 2011 and 0% the next year, before falling 0.7% through March 2013.
  • Meanwhile, over the past three years, health benefits rose a moderate 2%, 2.8% and 2.7% per hour for the broad workforce, evidence that lower health care inflation doesn’t explain the unusual declines in some sectors. Rather, a likely culprit is a shift in the mix of full-time workers who will come under ObamaCare’s employer mandate and part-time workers who won’t.
  • Employers who offer full-time workers coverage can escape a potential fine of $3,000 per worker if employees work fewer than 30 hours per week. That fine, levied for each full-time worker who accesses ObamaCare subsidies, equates to $5,000 in deductible wages for a profit-making firm with a 40% federal and state tax rate.
  • BLS data, though volatile from month to month, clearly show that retailers have been cutting the average workweek for nonsupervisory employees over the past year. While most employers have yet to reveal how they plan to adjust their workforce and benefit policies, a number have provided anecdotal support for the data now coming in.

AAA Parking and Regal Entertainment Group, a national movie theater chain, are among employers confirming a shift to part-time work in response to ObamaCare. Reuters reported that Wal-Mart Stores this year has noticeably upped its hiring of temp workers. May’s employment report showed that the number of temp workers hit a record high, evidence that employers are embracing temps as a strategy for dodging ObamaCare fines.

The cost-shifting of ObamaCare’s expenses won’t only fall back on government, but on workers clocking fewer hours and, in other cases, on workers covering a bigger share of their health premiums. Among private employers with 50-99 workers, spending on health benefits per hour fell 0.5% from a year ago in March.

This is noteworthy because these companies are just above the 50-worker threshold above which ObamaCare’s mandate will apply. At private firms with up to 49 workers, health benefits rose 2.1% from a year ago.

In private-sector service jobs, workers received, on average, 90 cents in health benefits, $10.71 in wages and $14.19 in total compensation per hour. For perspective, ObamaCare’s $5,000 wage-equivalent fine comes out to $2.40 an hour for a 40-hour workweek. That’s nearly 4.5 times after-tax spending on health benefits.

*Modified from a Investors Business Daily article

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How the New Health Law Could Raise Costs for Young, Healthy Employees

  • The younger and healthier a small business’s workforce, the greater its chances of facing a big spike in health-insurance premiums next year. That is because the Affordable Care Act’s impact on small employers will split largely on generational and industry lines, putting owners of firms with mostly male employees in their 20s and 30s, at a disadvantage.
  • Starting in January, insurers will no longer be able to set premiums for small-group plans, which apply to employers with fewer than 50 employees, based on a firm’s industry or the health or gender of its staff. Insurers will still be able to take into account the age of a firm’s workers, though to a lesser extent.
  • The result: the cost of health care will be more evenly spread among small businesses, as employers with mostly young and healthy workers pick up the costs of firms that comprise the opposite. The rebalancing will drive up premiums for some companies in industries with lots of young, healthy workers, such as technology, while moderating rate increases for firms with older and sicker workers, and in higher-risk industries such as industrial manufacturing.
  • Small-business clients are considering various options for absorbing premium increases next year. For example, some are looking at cutting back on the percentage they contribute toward employees’ costs or no longer covering dependents. Others, mainly firms with fewer than 50 employees, are thinking of dropping their plans and directing workers to the state insurance exchanges.

Ms. Hasson, who started the Computer Company in 1996, pays 75% of premiums for employees and 25% for dependents. Her team, including 29-year-old Art Desrosiers, could therefore also feel the effects of the law next year. Paying for health insurance, even if it costs more next year, “would bother me but it would still be worth it,” says Mr. Desrosiers, a data-center administrator, whose premiums currently total about $113 a month. “You don’t know what’s going to happen to you.”

By comparison, Winsted, Conn.-based HDB Inc., a manufacturer of metal hinges that does business as Homer D. Bronson Co., is among those whose premiums could rise by a lower percentage next year. Owner John Zoldy says his broker estimates that the 16-employee firm, with an average age in the early 50s, could be charged a rate increase as low as 10%, down from last year’s 18% increase.

Amit Mrig, owner of Academic Impressions, an educational-services provider to colleges and universities in Denver estimates that the firm’s premiums could rise by as much as 40% next year, up from just 10% in past years, due to its mostly young and healthy workforce of 25 people. “It’s going to take money out of my pocket,” says Mr. Mrig, because he’s afraid that he could lose employees if he were to cut back benefits, hiring or pay raises to cope. “We’re a totally personnel-driven organization.”

Daniel Fusch, one of Mr. Mrig’s employees, says that health benefits play a “significant” role in where he chooses to work. The 32-year-old director of publications and research is on a family plan and has a daughter who is disabled. “That’s mainly where the package is especially important,” he says. “Her medications are pretty expensive.”

Mr. Fusch has been with Academic Impressions for seven years and describes its health benefits as “far superior” to what past employers have provided him. If the company were to drop its coverage, he says he might have to consider changing jobs. Health-insurance “is one of the two or three key factors for me

*Modified from a WSJ article

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Will New Health Insurance Be Too Expensive for America’s Lowest-Paid?

  • Starting next year, firms with 50 or more full-time equivalent employees will need to offer health insurance to all their workers who average 30 or more hours a week. In addition, employers must not ask employees to contribute more than 9.5% of their income to health-insurance premiums. Otherwise, the employer could face penalties.
  • Chris Angelo, president of a landscaping company in Santa Clarita, Calif., believes most of his low-wage workers will opt out of health coverage. But Chris Angelo, a second-generation owner of the landscaping firm, Stay Green Inc., doesn’t expect a groundswell of enrollments next year from lower-wage workers.
  • While the employees might say they’re interested in employer coverage, “we believe they will opt out,” says Mr. Angelo. His reasoning? “They’d rather have the cash than pay the employee portion of the premium.”
  • He says: “On the surface, it sounds appealing to them. There might be optimism without having all the facts.” Indeed, an employee who earns $10.50 an hour, says he’d love to have insurance, but he can’t afford the estimated $140 monthly cost for his share of the premium next year.
  • For an employee earning $30,000, for instance, a 9.5% salary contribution to the premiums is $2,850 a year. But under the law, the 1% penalty for that same employee who forgoes health insurance is only $300 a year.
  • Experience suggests that employers may struggle to figure out how many of their low-wage workers will opt in for employer coverage in 2014. By the same token, it suggests that many low-wage workers could remain uninsured next year, despite the law’s subsidies and penalties.

“Of course I prefer to have health insurance because I need it for my children, for my family,” says Romérico Herrera, a 48-year-old crewman who earns $11.50 an hour. Mr. Herrera, also speaking in Spanish, says he’s had health insurance through previous employers but hasn’t been insured since he started working at Stay Green two years ago. But Mr. Herrera would like to find out what kind of coverage he would get before signing up for health insurance. He says that he wouldn’t be able to contribute more than $100 a month. “I make so little that [contributing] more would mean working just to pay for insurance,” he said.

Mr. Angelo says he is working with a broker to find a plan that will be as affordable as possible for his workers. As he evaluates different plans, he must also consider his company’s bottom line. For instance, in one scenario, where all 270 employees participate and pay no more than 9.5% of their income to the premiums, it would cost the company $1 million a year—essentially wiping out the company’s profits.

One in three low-wage workers are employed by firms with fewer than 100 employees, according to the National Employment Law Project, an organized-labor-backed advocacy group for low-wage workers. “Employers are in limbo,” says Paul Fronstin, director of Health Research and Education Programs at the Employee Benefit Research Institute in Washington, D.C. “You never know what the low-wage worker’s position is—whether they have other family members who are working, or whether there is another member of the family who has benefits.”

Mr. Angelo says he believes the majority of his low-wage workers will opt out, based on past experience. For instance, the company offers a 401(k) program that most of the workers skip—even though Mr. Angelo offers to match their contributions, up to 4% of their salaries. “It’s been a struggle to get them to participate,” he says.

Also come January, under the law’s individual-mandate provisions, most U.S. residents will be required to have health insurance or pay a penalty. Low-wage earners who can’t afford their employers’ plans may seek coverage through Medicaid, if they are eligible, or through an individual plan available through a government-run exchange.

Alternatively, the workers may forgo insurance altogether and pay the small penalty, which could be their most affordable option. Low-wage workers who forgo employer-sponsored insurance may be able to claim a hardship exemption from the penalty.

Bill Reeder, owner of Campus Cooks in Glenview, Ill., says the insurance plan he intends to offer next year could cost the company $200,000 or $500,000, depending on the number of employees who sign on.Today, Campus Cooks, a food-service firm that operates in sorority and fraternity houses on 20 university campuses in the Midwest and Southeast, doesn’t offer insurance. Mr. Reeder polled his staff recently and found that about half of the staff is interested in an employer-sponsored health plan.

Mr. Reeder is hoping at least 75% will sign on. But he says it could be a challenge to get the chefs, who tend to be younger, healthier and lower-paid, earning between $10 and $20 an hour, to find value in a health-insurance plan when, for most of them, paying the penalty is so much cheaper. “We want the plan to be simple, be compliant and to get people on board,” Mr. Reeder says. “We are grappling with how much we can contribute and make it so everyone can be on the plan.”

*Modified from a WSJ article

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Employers Eye Bare-Bones Health Plans Under New Law

Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

  • Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.
  • Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.
  • Larger employers, generally with more than 50 workers, need cover only preventive services, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce penalty. Such policies would generally cost far less to provide than paying the penalty or providing more comprehensive benefits, say benefit-services firms. Some low-benefit plans would cost employers between $40 and $100 monthly per employee, according to benefit firms’ estimates.
  • Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach.
  • San Antonio-based Bill Miller Bar-B-Q, a 4,200-worker chain, will replace its own mini-med with a new, skinny plan in July and will aim to price the plan at less than $50 a month, about the same as the current policy, said Barbara Newman, the chain’s controller. The new plan will have no dollar limits on benefits, but will cover only preventive services, six annual doctors’ visits and generic drugs. X-rays and tests at a local urgent care chain will also be covered. It wouldn’t cover surgeries or hospital stays.
  • Tex-Mex restaurant chain El Fenix also said it would offer limited plans to its 1,200 workers, covering doctors visits, preventive care and drugs, but not hospital stays or surgery. “What our goal was all along was to make [offering coverage] financially palatable for the company as a whole, so we didn’t do damage and have to let people go or slow down our growth,” said Brian Livingston, chief financial officer of Dallas-based Firebird Restaurant Group LLC, owner of El Fenix.

It is unclear how many employers will adopt the strategy, but a handful of companies have signed on and an industry is sprouting around the tactic. More than a dozen brokers and benefit-administrators in 10 states said they were discussing the strategy with their clients.

“There had to be a way out” of the penalty for employers with low-wage workers, said Todd Dorton, a consultant and broker for Gallagher Benefit Services Inc., a unit of Arthur J. Gallagher & Co., who has enrolled several employers in the limited plans.

Pan-American Life Insurance Group Inc. has promoted a package including bare-bones plans including one with guaranteed term life insurance for seniors, according to brokers in California, Kansas and other states and company documents. Carlo Mulvenna, an executive at New Orleans-based Pan-American, confirmed the firm is developing these types of products, and said it would adjust them as regulators clarify the law.

The idea that such plans would be allowable under the law has emerged only recently. Some benefits advisers still feel they could face regulatory uncertainty. The law requires employers with 50 or more workers to offer coverage to their workers or pay a penalty. Many employers and benefits experts have understood the rules to require robust insurance, covering a list of “essential” benefits such as mental-health services and a high percentage of workers’ overall costs. Many employers, particularly in low-wage industries, worry about whether they—or their workers—can afford it.

But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm. That affects only about 30 million of the more than 160 million people with private insurance, including 19 million people covered by employers, according to a Citigroup Inc. report.

“For certain organizations, it may be an ideal solution to minimize the cost of opting out,” said David Ellis, chief executive of Youngtown, Ariz.-based LifeStream Complete Senior Living, which employs about 350 workers, including low-wage housekeepers and kitchen staff. Mr. Ellis, who was recently pitched a low-benefit plan, said it is one option the firm may consider to lower costs and still comply with the law, he said.

“We wouldn’t have anticipated that there’d be demand for these types of band-aid plans in 2014,” said Robert Kocher, a former White House health adviser who helped shepherd the law. “Our expectation was that employers would offer high quality insurance.” Part of the problem: lawmakers left vague the definition of employer-sponsored coverage, opening the door to unexpected interpretations, say people involved in drafting the law.

The low-benefit plans are just one strategy companies are exploring. Major insurers, including UnitedHealth Group Inc., Aetna Inc., and Humana Inc. are offering small companies a chance to renew yearlong contracts toward the end of 2013. Early renewals of plans, particularly for small employers with healthy workforces, could yield significant savings because plans typically don’t need to comply with some health law provisions that could raise costs until their first renewal after Jan. 1, 2014.

Insurers and health-benefits administrators are also offering small companies a chance to switch to self-insurance, a form of coverage traditionally used by bigger employers that will face fewer changes under the law. Employers are also considering limiting workers’ hours to avoid the coverage requirements that apply only to full-time employees.

Regulators worry that some of these strategies, if widely employed, could pose challenges to the new online health-insurance exchanges that are a centerpiece of the health law. Among employees offered low-benefit plans, sicker workers who need more coverage may be most likely to opt out of employer coverage and join the exchanges. That could drive up costs in the marketplaces.

Officials at the Department of Health and Human Services said they haven’t seen widespread evidence of such strategies. They said the health law would bring new options, including the subsidized exchange plans, to low-income workers, and that most employers who offer coverage now choose to provide much more robust benefits.

Limited plans may not appeal to all workers, and while employers would avoid the broader $2,000-per-worker penalty for all employees not offered coverage, they could still face a $3,000 individual fee for any employee who opts out and gets a subsidized policy on the exchanges.

But the approach could appeal to companies with a lot of low-wage workers such as retailers and restaurant operators, who are willing to bet that those fees would add up slowly because even with subsidies, many workers won’t want to pay the cost of the richer exchange coverage.

A full-time worker earning $9 an hour would have to pay as much as $70 a month for a midlevel exchange plan, even with the subsidies, according to Kaiser. At $12 an hour, the workers’ share of the premium would rise to as much as $140 a month.

Firms now offering low-cost policies known as mini-meds, generally plans that cap benefits at low levels, could favor the tactic. Companies sought federal health department waivers to cover nearly four million with mini-meds and other similar plans, which will be barred next year.

Because the coverage is limited, workers who need richer benefits can still go to the exchanges, where plans would likely be cheaper than a more robust plan Bill Miller has historically offered to management and that costs more than $200 per month. The chain plans to pay the $3,000 penalty for each worker who gets an exchange-plan subsidy.

Many more workers will continue to go without insurance, despite the exchanges and the limited plan. Currently, only one-quarter of workers eligible for the mini-med plan take it.

*Modified from a WSJ article

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Part-timers to lose pay amid health act’s new math

Many part-timers are facing a double whammy from President Obama’s Affordable Care Act.

  • The law requires large employers offering health insurance to include part-time employees working 30 hours a week or more. But rather than provide healthcare to more workers, a growing number of employers are cutting back employee hours instead.
  • The result: Not only will these workers earn less money, but they’ll also miss out on health insurance at work.
  • Across the nation, hundreds of thousands of other hourly workers may also see smaller paychecks in the coming year because of this response to the federal healthcare law. The law exempts businesses with fewer than 50 full-time workers from this requirement to provide benefits.
  • Overall, an estimated 2.3 million workers nationwide, including 240,000 in California, are at risk of losing hours as employers adjust to the new math of workplace benefits, according to research by UC Berkeley.
  • Employers say these cutbacks are necessary given the high cost of providing benefits. The average annual premium for employee-only coverage was $6,540 in California last year. Family coverage topped $16,000 a year. Those premiums have shot up 170% in the past decade, more than five times the rate of inflation in the state.
  • There has been widespread speculation that many businesses would drop health coverage entirely in favor of paying a federal penalty of $2,000 per worker. Benefit consultants and insurance brokers say many companies examined that scenario. But they say most rejected it because of the disruption it would cause for employees and the potential for putting an employer at a competitive disadvantage in luring talented workers.

Consider the city of Long Beach. It is limiting most of its 1,600 part-time employees to fewer than 27 hours a week, on average. City officials say that without cutting payroll hours, new health benefits would cost up to $2 million more next year, and that extra expense would trigger layoffs and cutbacks in city services.

But big restaurant chains, retailers and movie theaters are starting to trim employee hours. Even colleges are reducing courses for part-time professors to keep their hours down and avoid paying for their health premiums.

All this comes at a time when part-timers are being hired in greater numbers as U.S. employers look to keep payrolls lean.

One consolation for part-timers is that many of them stand to benefit the most from the healthcare law’s federal premium subsidies or an expansion of Medicaid, both starting in January.

The law will require most Americans to buy health insurance or pay a penalty. Yet many lower-income people will qualify for government insurance or be eligible for discounted premiums on private policies.

“For people losing a few hours each week, that’s lost income and it has a real impact,” said Ken Jacobs, chairman of the UC Berkeley Center for Labor Research and Education. “But many low-wage, part-time workers will also have some affordable options under the federal law.”

Bill Dombrowski, chief executive of the California Retailers Assn., said employers are reducing hours because “it’s the only way to survive economically.”

The full effect of these changes in the workplace isn’t known yet because many employers are still considering what to do. Many companies waited to see whether the landmark legislation would survive a Supreme Court challenge and the outcome of last fall’s presidential election.

Now many employers are scrambling to understand the latest federal rules on implementation and are analyzing what makes the most sense for their workforce and for running their business. Instead, pruning the hours of part-timers has attracted far more interest.

“That will be a widespread strategy,” said Dede Kennedy-Simington, vice president at Polenzani Benefits in Pasadena. “Employers will be making sure their payroll system can flag when part-time workers are getting close to the cap they set.”

Long Beach officials said they studied the various budget options and opted for a plan that should affect only a small portion of its workforce. The city estimates about 200 part-time workers will be among the most affected by a reduction in hours, representing about 13% of its overall part-time staff. The city calculated that the federal penalty for dropping coverage completely for its 4,100 full-time employees would have been about $8 million.

Some California lawmakers worry that the federal penalties for not providing health coverage aren’t enough of a deterrent. They have proposed additional state fines to prevent major retailers, restaurant chains and other employers from restricting hours and dumping more of their workers onto public programs such as Medi-Cal. Opponents say the proposal is unnecessary and could deter companies from adding workers.

Some supporters of the Affordable Care Act say they welcome a gradual shift away from employer-sponsored coverage if new government-run exchanges give consumers a choice of competitively priced health plans. Some low- and middle-income workers who qualify for federal subsidies may end up paying less by buying their own policy next year compared with their contribution toward employer coverage.

*Modified from a Los Angeles Times article

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