Health-care changes chill businesses’ expansion plans

jwilkinson@thestate.comSeptember 1, 2013 

— It’s the lunch rush at the Lizard’s Thicket restaurant on Garner’s Ferry Road and the wait staff is hauling out armloads of Southern home cookin’ — salmon patties and mac and cheese, fried chicken and greens, country fried steak and mashed potatoes and gravy.

All seems well on the surface: Business is up as the country slowly recovers from recession and the restaurant is bustling. But for general manager William Bolchoz, there is an undercurrent of concern caused by the expected heath insurance reforms under the Affordable Care Act, which requires businesses to provide insurance to all employees who work 30 hours a week or more — or be penalized.

The executives of the 15-store chain have asked him to hire fewer full-time workers and more part-timers, a challenge that requires him to bring on more people to cover shifts while at the same time making sure those workers are dependable, motivated and happy.

“Instead of two dishwashers at 40 hours a week, I have to hire four dishwashers at 20 hours a week,” he said. “But it’s hard to find dependable people who are willing to work 20 hours a week on nights and weekends.”

Such is the limbo that some businesses, particularly mid-sized hospitality businesses, are facing on this Labor Day: More people are taking advantage of their services in an improving economy, but the uncertain implications of health care reform are causing them to hedge their bets against possible higher operational costs.

“There is a lot of indecision and lot of less-than-accurate information out there,” said Ike McLeese, chief executive of the Greater Columbia Chamber of Commerce. “That is creating an atmosphere of indecision.”

‘We’ve heard all kind of numbers’

Lizard’s Thicket controller Clayton Tapp said that the uncertainties are what caused him and chief executive Bobby Williams to ask that more part-time employees be hired.

“We’ve heard all kind of numbers,” he said. “We just don’t have a feel for it. Honestly, it makes you take a pause in your business plan.”

Of most concern to Tapp is how many of his current 300 or so full-time employees would remain on the company health insurance plan or just drop out because they could buy insurance from the federal insurance marketplace. The smaller pool of employees in his corporate policy would cause the company’s premiums to rise. Also, his insurer might opt to raise premiums generally, because it would be required to insure people who have existing conditions and require more care.

“We don’t know what the actual premiums will be,” he said.

But Frank Knapp, president and chief executive of the S.C. Small Business Chamber of Commerce, said that the hospitality industry is facing the most challenges from health care reform because they need so many employees, pay the least and have the highest turnover.

He noted that 96 percent of all businesses in the state have fewer than 50 employees and won’t be required to provide health insurance. And, he said, large manufacturing firms that provide health insurance have already positioned themselves to absorb any new costs.

“This has always been a tempest in a teapot,” Knapp said. “The opponents have always targeted that little sliver who, maybe in 2015, will be required to provide health insurance, or their premiums will go up.”

He added that those business owners with fewer than 50 employees could be better off with cheaper rates for themselves and healthier employees because they would have better access to health care.

“We are so close to a revolution in health care insurance,” he said. “People are going to be surprised. There are going to be a lot of options for small business owners. It’s an exciting time.”

‘They will deal with it’

South Carolina Secretary of Commerce Bobby Hitt said that from his point of view, the upcoming changes in health insurance are causing “some anxiety” among big business and large manufacturing firms, but it’s not stopping them from forging ahead with expansion plans.

He offers Boeing’s decision to expand their North Charleston plant and Continental’s decision to build a new plant in Sumter as examples. Large manufacturing firms have to continue to supply product and grow, he said. Health care costs are just another business challenge like fuel costs and materials, he said.

“Whatever is going to come, they will deal with it,” Hitt said.

But University of South Carolina economist Joey Von Nessen notes that while the state is still growing manufacturing at a crisp rate – especially when compared with neighboring states – that growth rate has slowed from 1.8 percent in fiscal year 2011-2012 to 1 percent in 2012-2013.

“With the health care, there is a lot of concern and that perhaps has put off some hiring,” he said. “Uncertainty creates paralysis in the market.”

But Von Nessen noted that the growth rate of jobs in the hospitality and leisure industries is accelerating as people feel more confident in the economy and are willing to spend more money on dining, recreation and travel.

“They either have more disposable income or feel safer spending what they do have,” he said.

That leaves hospitality employers like Lizard’s Thicket faced with the dilemma of ramping up for new business, but tightening up their belts in the face of health care reform as well.

“It’s the unknown that scares us,” Tapp said.


HIRING TRENDS

With the country’s economy still recovering and health care reform set to take hold in 2015, employers are making adjustments:

•  Some small businesses may hold off on expanding to stay under the 50-employee bar that would require them to provide health insurance.

•  Some mid-sized businesses that already provide health insurance could limit the number of full-time employees (30 hours or more per week), fearing their health care premium payments will rise.

•  Large companies, particularly manufacturing firms, likely will continue to hire full-time workers to meet production goals, but they remain uneasy about how health care reform will affect their bottom line.

•  The rapid growth of manufacturing jobs in South Carolina is slowing, although still outpacing its neighboring states.

•  The growth of lower-paying hospitality and leisure jobs is increasing, as more people feel confident enough to book vacations and travel in the Palmetto State.

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