Beginning in 2014, health insurance will be available to individuals and small businesses through state-run “exchanges.” These will require insurance companies to compete for business in the marketplace.
By Pat Pape, Contributing Editor.
Now is the time for employers to prepare to meet requirements of the Affordable Care Act (ACA), the Obama administration’s healthcare law that goes into effect Jan.1, 2014. The controversial Act is almost 20,000 pages long, but the basic premise is simple: to ensure all Americans have health insurance by 2014.
As of New Year’s Day, every American must purchase health insurance or pay a tax for failure to do so. Employers with 51 or more full-time employees must offer insurance to workers or be fined by the Internal Revenue Service (IRS).
In early April, just 61% of companies with between three and 199 employees offered health insurance, according to a December report from the Kaiser Family Foundation. By comparison, 98% of employers with 200-plus workers offer coverage to at least some of them.
Under ACA, businesses with 50 or fewer full-time employees are exempt from the new mandate, a group that the Obama administration has estimated to be 96% of all U.S. businesses.
However, an employee is considered full-time if he or she works 30 hours or more per week or works a variable schedule that averages 30 hours per week (now known as a full-time equivalent employee or FTE).
As of June 1, 2013, all employers must start tracking the hours of each employee to determine which ones qualify as full-time or FTE under the ACA definition. All U.S. employers, not just those who fall under ACA guidelines, will be required to report this information and wage information to the government.
“Retail in particular is going to be better suited to this than some other industries because they are already used to recording hours,” said Mike Kahley, senior vice president of the Lockton Cos., an insurance and employee benefits consultancy.
The hours an employee works prior to June 1 will not be considered toward ACA requirements. But don’t attempt to manipulate schedules and cut the number of full-time workers in an effort to thwart your ACA obligation.
“There is a prohibition on taking action with an eye toward [reducing] health benefits,” said Neil Trautwein, vice president and health care lobbyist for the National Retail Federation (NRF), a Washington, D.C.-based trade organization. “A smarter approach for a retailer who is mindful of this is to use attrition to his or her advantage and redefine positions as they become open.”
For convenience store operators, using more part-time employees may help to avoid additional insurance expenses, but cost more in other areas.
According to the National Association of Convenience Stores’ (NACS) State of the Industry report, the average convenience store has five full-time and five part-time employees. Of those staff members, full-time employees are more productive and stay in their jobs longer than their part-time colleagues.
Making Insurance Available
Information from the government has been coming out in “bits and pieces,” according to Trautwein, but he expects more details to be available to employers in late summer. Starting Oct. 1, 2013, employers will be able enroll their workers in the insurance plans approved and available in the state where they do business. All employers who must offer insurance should have full-time employees enrolled by Jan. 1, 2014 or the start of their accounting year later in 2014.
Originally, each small business employee was to choose his or her own medical plan through the government’s health insurance exchange. That feature of the ACA has been delayed until at least 2015 because of “operational challenges,” according to a government announcement in April.
“The employees’ cost will be a function of their income,” said Kahley. “The intent is to make sure those currently uninsured have the ability to buy affordable care. The less you make, the less you spend for the premium.”
Some employers will be eligible for a small business tax credit to offset the cost of providing health insurance. To qualify, they must have fewer than 25 full-time employees (in this situation, a full-time employee is one who works 40-plus hours a week), pay annual wages that average less than $50,000 and cover at least 50% of the cost of single (not family) health insurance for each worker.
The largest tax credits are available to the smallest businesses with low-wage workers. To determine your eligibility for tax credits, go to www.irs.gov.
As Convenience Store Decisions goes to press, the fees for mandated health insurance have not been announced, but everyone agrees that ACA will cost employers more.
“The most obvious impact to any small business, including convenience stores, is that it’s going to be expensive to comply,” said Tom Robinson, president of Robinson Oil Co., which operates Rotten Robbies, a 34-store chain in the San Francisco area.
Even though Rotten Robbie currently offers healthcare coverage to employees who work a minimum of 30 hours per week, not every employee chooses to enroll.
“A higher percentage of people will take it in the future, and we’re going to end up covering more people,” Robinson said. “It will be more expensive per employee, and end up costing us more.”
Though no business operator wants to say that the expense of added health benefits will be passed onto the consumer, “the cost probably impacts everybody,” said Robinson, who is also the former NACS chairman.
He does anticipate one potential advantage. “Small operators with less than 50 employees don’t have to comply,” he said. “Theoretically, the employers who have to provide insurance may be able to get better employees.”
No One Size Fits All
The NRF has argued that additional employer expenses resulting from the ACA mandate will force some companies to reduce employee count and discourage smaller operations from growing past the 50-employee threshold.
“We’re not a big fan of the law,” said Trautwein. “We thought a smarter approach would be to target the people without coverage—not penalize employers who are voluntarily providing coverage. But we have to live with the law that’s on the books and try to limit the adverse impact and help our members navigate through the law.”
Each employer will face individual challenges and questions. Experts expect a lot of questions will arise in the first few months of 2014. After January 2014, Trautwein predicts a lot of confusion.
“The administration will be going slow on enforcement issues to allow good faith efforts by retailers to come in compliance with the law,” he said. Be prepared by understanding what will be required before it’s too late.