Obamacare doesn’t take full effect for another year, but businesses are already worrying about the cost of providing the health insurance to employees and, in some cases, exploring ways to avoid it.
The Patient Protection and Affordable Care Act, generally referred to as Obamacare after the President pushed it through in 2010, requires companies with more than 50 full-time employees to provide medical coverage starting next January.
Rene Peña, a certified public accountant with the El Paso firm of Peña, Briones & McDaniel, said he’s advising, and in some cases warning, his clients about the implications of the insurance requirements this year.
Under the law, employees working more than 30 hours a week are considered full time. And the total number of full-time employees isn’t based on the number of bodies but on full-time equivalents, or FTEs, according to hours averaged over this year.
“So, if I have 35 full-time employees and 20 on part time who are working 25 hours a week, I’m going to qualify as a large employer who has to provide insurance,” Peña said. “I do have some clients who fall into this category, and they do not have and cannot have the ability to pay for health insurance or the penalty.”
The penalty, which the U.S. Supreme Court determined to be a tax in a ruling that effectively saved Obamacare last year, is $2,000 per uninsured employee.
Peña said those employers will have to figure out how to avoid being classified as a large employer under the Affordable Care Act, even if it means laying off employees.
In El Paso, a city with many small businesses that are struggling financially, acting quickly to address the FTE issue will be very important come 2014, Peña said.
“Right now, if I have client with 55 employees, I’m going to counsel him to remove five and either convert them to part-timers or fire them,” Peña said.
That’s tough advice, but it’s what companies need.
“I’m the cold-hearted numbers guy,” Peña said.
The situation is more challenging for companies like another one of his clients, a construction company with just over 100 full-time employees that has never offered health insurance.
Doing so with policies carrying the mandated minimum deductable of $2,000 would cost the company about $10,000 per worker, or more than $1 million a year, he said.
The company can’t shift a majority of that cost or even half of it to workers because the health care act mandates that the employer pays no less than 60 percent of the insurance costs.
So, while a company can shift 40 percent of the cost to the employees and take it out of their paychecks, the burden on an employer that has never offered insurance – and workers who have never paid for it – will be huge, Peña said.
“I have clients that are facing an existence or non-existence problem in front of them,” he said.
According to Business Week magazine, initial data from a study of employers with 10 to 500 employees predicts that “the average per employee cost of health coverage will rise about 6.5 per cent in 2013.”
That study, the 2012 National Survey of Employer-Sponsored Health Plans, was conducted by Mercer, a national human resource consulting company.
Companies will have the option to cancel their coverage and pay the $2,000 fine or tax to help defray the cost of providing insurance to individuals through insurance exchanges.
The Mercer study found that few employers expect to cancel their health plans in five years after the health care act is fully implemented, but 16 percent of smaller employers said they thought they would, Business Week reported.
Companies providing employee health plans have been receiving a tax credit on 35 percent of their contribution since 2010.
That credit goes up to 50 percent in 2014.
E-mail El Paso Inc. reporter David Crowder at email@example.com or call (915) 534-4422, ext. 122 and (915) 630-6622.