A wave of higher health insurance expenses will threaten the bottom lines of many small and medium-sized businesses starting next year under the Affordable Care Act. And if S.C. leaders turn down expanding Medicaid, as expected, the wave will be even bigger.
Those business owners could face fines of up to $2,000 per full-time employee if the state refuses to expand Medicaid.
“Restaurants ought to be out there championing Medicaid expansion,” said Frank Knapp, chief executive of the S.C. Small Business Chamber of Commerce. “They ought to be beating down (Gov. Nikki Haley’s) door and saying, ‘Please expand Medicaid.’ Anybody in the service industry should be.”
For many service-industry businesses, however, it’s a struggle to get through day-to-day operations. Planning ahead to meet a confusing, and still changing, set of regulations is a daunting task.
“There are so many regulations that haven’t come down from the feds that we’re still flying by the seat of our pants on this,” said Ben Homeyer, state director of the National Federation of Independent Businesses.
Knapp and Homeyer are lobbyists whose jobs require them to pay attention, and even they have trouble keeping up.
Homeyer’s group fought against the Affordable Care Act, filing a lawsuit that was among those that led to last year’s Supreme Court decision that the law is constitutional. Knapp is pro-Affordable Care Act.
They both agree, however, the Affordable Care Act is going to be a big change for small businesses, regardless of whether the state rejects or accepts Medicaid expansion.
The Supreme Court left it up to the states whether to expand Medicaid coverage to include any adult earning less than 138 percent of the federal poverty level. That is about $15,000 a year for an individual or $31,000 for a family of four. Many entry-level workers in service-related industries, including restaurants and hotels, would be included in that coverage.
However, Haley and many Republican legislators want the state to opt out of expansion, saying Medicaid is wasteful and mismanaged, and the Affordable Care Act is financially unsustainable. Leaders in 17 other states have indicated they plan to turn down the expansion too.
But there’s a catch: Turning down expansion could hurt many businesses because of another provision in the act.
In 2014, all businesses with more than 50 full-time employees will be required to offer their workers affordable health insurance. And there’s a large fine – $2,000 per worker over a 30-employee threshold – if a company doesn’t offer affordable health insurance. But assuming they offer affordable health care to all of their employees, employers wouldn’t be penalized if their low-wage employees decide to go instead with Medicaid coverage.
Many small businesses contacted by The State declined to comment about their looming insurance dilemma, saying they don’t know enough about the upcoming changes to talk about them.
“Many small businesses haven’t been paying attention,” said Columbia health-care economist Lynn Bailey. “They think: ‘I’ll wait until somebody tells me what to do.’ ”
Hiring more part-time workers
Bobby Williams, chief executive of Columbia-based Lizard’s Thicket, has been paying attention to the health insurance changes. Many of the 700 workers in Lizard’s Thicket’s 15-restaurant chain are low-wage employees who would be covered by Medicaid if the state accepted the Affordable Care Act’s expansion.
“Restaurants provide a lot of jobs for people who are otherwise unemployable,” Williams said. People who are 60 years old, never finished high school and just got laid off, “they aren’t qualified for most jobs, but they can wash dishes.”
Williams has a plan to deal with the oncoming wave of higher health-care costs regardless of what the state leaders decide.
Because he will have to offer health insurance to all of his current full-time employees starting in 2014, Williams began reducing his full-time staff last year. All new hires are part-timers, working 30 hours or less, which means Williams doesn’t have to offer them health insurance next year. The rapid turnover among workers in the restaurant business also should cut the number of full-time employees at Lizard’s Thicket by 2014, further cutting the company’s health insurance tab.
Williams would save even more if his low-wage employees fell under Medicaid expansion. For now, though, he is more worried about finding a health insurance plan for all of his full-time employees. His company’s share of their health insurance premiums will come to about $1 for every hour that a full-time employee works, and he suspects many of his workers will have trouble paying their portion of that premium.
“A lot of my employees are going to want to opt out,” Williams said. “They can’t afford to spend up to 10 percent of their salary for their insurance.”
Insult to injury?
Some companies report they are having trouble finding any group health insurer willing to cover their workers.
Roper Staffing is one of those cases. The Columbia-based business links employees seeking temporary work with companies who need them. Even while on temporary jobs elsewhere, the employees work for Roper, which employs about 500 to 600, according to chief executive George Roper.
Roper’s employees earn a wide range of pay, and most don’t have health insurance. Many are young and willing to take their chances that they will be healthy.
“When we tried to offer health insurance in the past, only about 10 percent were willing to pay the premiums,” Roper said.
Roper said every insurance company he contacted to sell his company insurance turned him down. They were not interested in writing a policy to cover temporary workers, many working for low wages and not wanting to pay for insurance.
“There’s no chance that I can purchase the insurance, so they’re going to charge me a penalty. And to add insult to injury, (the penalty) is not tax deductable,” Roper said. “Everything they’re doing is a disincentive for small businesses.”
The Affordable Care Act will require some hurdle-jumping, but he sees it as a plus for small businesses.
“People will be healthier, and what business large or small doesn’t want a healthier workforce?” Knapp said. “In fact, it’s even more important for small businesses. When you don’t have people to cover for sick employees, every employees has added importance.”
Small business impact
Health-insurance changes looming for small businesses in 2014 due to the Affordable Care Act
Firms face no fines or insurance costs if they don’t cover full-time
Must offer health insurance for all full-time employees or face fines of $2,000 for the number of employees above 30 that are not insured. (A company with 75 employees would face a fine of $90,000 – 75 minus 30 times $2,000.)
Employees making less than about $15,000 for an individual or about $31,000 for a family of four would be eligible for Medicaid. Companies with more than 50 full-time employees wouldn’t have to provide health insurance for those low-wage employees.