For employers and employees alike, health insurance problem forces tough decisions

WHAT EMPLOYEES NEED TO KNOW

In Georgia, employees can use the website, HealthCare.gov, to apply for coverage, compare plans and enroll. Individuals can apply as early as Oct. 1, 2013.

Individuals can learn about types of health coverage and research questions before open enrollment begins Oct. 1, 2013. Coverage can start as soon as Jan. 1, 2014.

If someone can afford it, but doesn’t have health insurance coverage in 2014, the person may have to pay a fee. The person must also pay for all of his or her care.

The fee in 2014 is 1 percent of annual income or $95 per person for the year, whichever is higher. The fee increases every year. In 2016 it is 2.5 percent of income or $695 per person, whichever is higher.

Source: HealthCare.gov

Lisa Ehlers had landed her dream job.

After 19 years teaching elementary school in Cherokee County, the Woodstock resident used her new master’s degree in social work to secure a job at a for-profit agency that provides outpatient mental health services to children and adolescents.

“I just loved it,” Ehlers said of her time at Focus Counseling and Training. “I loved (owner Beth Brock) and the other employees. But I couldn’t stay.”

Ehlers, 44 and a single mom after her husband died in 2005 from cystic fibrosis, needed health insurance for her two boys, especially her 13 year old who suffers from bipolar disorder and requires costly medications and therapy. Brock could not afford to offer it, so Ehlers took a job at the larger Ridgeview Institute in Smyrna, which did.

Ehlers’ story offers one small example of how the availability of health insurance can affect employers and employees in the most personal and even painful ways: Focus lost a dedicated worker it did not want to lose. The story can also serve as a microcosm of America’s larger health care crisis — the lack of affordable coverage for all — and how the grand effort to solve the problem, the Affordable Care Act, is forcing some companies and employees to make tough business decisions.

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Employers far and wide have criticized the ACA. They say health coverage shouldn’t be government-mandated and add that the requirement that businesses offer it will have unintended negative consequences.

For Brock, the ACA will limit her hiring and cause her to put off the big plans she had to open a second office in Savannah, her hometown, she said.

It will, she said, “stop us from growing.”

She is angry because Congress and the White House “put something into law without knowing what it was or how it would affect the big picture.”

About 49 million people don’t have health insurance because they can’t afford it, or don’t see it as a priority. Some haven’t been able to obtain it, even if they’ve wanted it, because they have pre-existing medical conditions. As a result, the uninsured often had to seek care in high-cost emergency rooms. Medical bills are the nation’s No. 1 cause of bankruptcy.

The ACA is supposed to result in affordable health insurance for all Americans. And large employers — those with 50 full-time workers or more — are expected to lead the way by offering coverage. If they don’t, they face a $2,000-per-worker annual fine starting in 2015, a penalty that was delayed a year to give employers more time. The uninsured also will be able to seek coverage through so-called exchanges.

Brock, whose 10-year-old firm has 40-plus staffers and was on track to pass 50, said she wants to provide coverage, but, “It’s too risky.”

“In staff meetings, she would bring it up and say, ‘I really wish that I could provide it, but it would put me out of business,’” Ehlers recalled.

Brock said the best deal she has been able to find would cost her business about $300 per employee per month for single coverage — with employees picking up the other half of the $600 total monthly premium.

About 14 of the employees of Focus, including Brock, would take the coverage if the company offered it, Brock said after taking a survey of her employees. That would come to more than $4,000 a month.

It may not seem like a lot, but it’s still too much.

“Sometimes, we don’t clear more than $1,000 a month after payroll,” Brock said.

Brock buys her own basic health coverage, as does her husband. Together, they pay $1,100 a month.

The ACA, Brock said, “is stopping companies from growing. They made an assumption that all businesses over 50 employees could afford to offer health care, and that’s just not true.”

She said she knows there are small businesses who are profitable enough to afford to offer health insurance, but there are plenty who can’t, “and they’re not Ebenezer Scrooge.”

Of employees like Ehlers who’ve left, she said, “I felt bad for them. I can’t blame people wanting to get insurance.”

Many businesses will find themselves in the same place as Brock, said David Cole, an attorney who specializes in employment law for Freeman Mathis & Gary in Atlanta. “I think there is no question that (the ACA) imposes a burden on employers,” he said. The law will require employers to offer coverage to more employees and to subsidize it so that it is deemed affordable for employees.

“This is a large expense many businesses have not had to incur under their current pricing structures, so it will likely reduce their margins or result in additional costs being passed on to consumers,” Cole said.

Some observers who support the mandate that employers offer affordable insurance to employees downplay the potentially negative impact on businesses.

The mandate affects a “relatively small percentage of employers,” said Edwin Park, vice-president for health policy at the Center on Budget and Policy Priorities, a not-for-profit Washington, D.C.-based think tank. “This really doesn’t hit a lot of firms.”

According to a survey of employers by consulting firm Mercer, 98 percent with 500 or more workers already offer a health plan, 92 percent of those with 200 to 500 do, and 80 percent with 50 to 200 workers do. Of those with 10 to 50 workers, 56 percent offer coverage, but those businesses are exempt from the mandate and penalty.

Park also said that affected employers can offer health coverage and still grow their business by changing their “compensation patterns” — perhaps offering less in salary increases.

David Bottoms, vice president of The Bottoms Group, an Atlanta benefits and insurance consultant and broker, said, “I do hear often from clients with around 50 employees that they plan to very carefully monitor their size to ensure that they stay below the 50-mark. For the employer who does not currently offer medical coverage, that 50th employee could be very expensive for the employer.”

A self-described conservative operator, Brock said she watches her spending closely. She buys used furniture for the agency’s offices. She rents space at very reasonable rates in what amounts to a warehouse/industrial park in a plain section of Woodstock.

Frills are the $40 in snacks that she might occasionally pick up for kids waiting in the reception area.

She says she’s not getting rich, either, noting, “I don’t have a second house,” and, “I drive a used car.”

“You don’t get into this for the money,” she said. “It’s a calling.”

Still, there are costs, for computers, information technology services, utilities and other typical expenses beyond rent and payroll.

There’s not a lot left at the end of the month, she said, and raising prices isn’t an option because that’s regulated by insurers. Companies in other industries say raising prices isn’t always possible for them, either, as competitors can then undercut them.

Focus isn’t the only business that loses out if it doesn’t grow, Brock said. She calculated that she spends about $4,700 a month on equipment, supplies and services other than rent. That money goes to other companies that, in turn, can reinvest the revenue and possibly hire more people.

If companies like Focus don’t grow, it stifles the whole cycle, she said.

Brock isn’t completely giving up on increasing her staff of therapists and para-professionals, or opening the Savannah location, or offering health insurance.

It’s just that now isn’t the time.

“I’m hoping something gives,” she said.

In the mean time, some of the current employees at Focus are still wrestling with the issue of health care insurance.

Terry Kinton, a full-time therapist, is one of those who would like to take company-provided insurance if it was offered.

Kinton’s husband, who has had significant medical problems, is covered under Medicare, and her three non-adult children qualify for coverage under Georgia’s PeachCare program.

But Kinton herself goes without health insurance. The 51-year-old Canton resident hasn’t had a serious medical issue, and she’s been able to use the pay-what-you-can services offered by a Christian clinic near her home.

Still, she’s concerned about what could happen.

If something catastrophic occurred, she acknowledged, “I’d be in trouble.”

Kinton said even if Focus was able to offer coverage, the roughly $300-a-month tab for her would be too much.

Kinton said she understands Brock’s position. She pointed out that Focus is generous when it comes to providing other benefits, including occasional professional training programs, a less risky expense.

“I think it’s really hard for small businesses,” Kinton said. “I don’t see how people can make it. It’s sad when you can’t grow. … Isn’t that every business person’s dream?”

Still it’s not as though Kinton hasn’t contemplated looking for a job with health insurance.

“I won’t tell you I haven’t thought about it,” she said.

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COPING WITH THE AFFORDABLE CARE ACT: SOME DIFFERENT BUSINESS STRATEGIES

Under the Affordable Care Act, employers with more than 50 full-time workers must offer affordable health insurance to their employees, who then can accept the coverage or reject it. The vast majority of larger employers already offer insurance and plan to continue. For them, the requirement is expected to have limited initial impact. For smaller businesses and those that don’t offer coverage, however, the requirement to provide the benefit stands to have a significant financial effect. Here are some of the different ways Atlanta area employers are planning to cope with the law.

PAYING THE PENALTY

North Georgia Staffing

Employees: More than 50.

Location: Kennesaw

Business: Temporary staffing agency

When word first broke of the Affordable Care Act’s employer insurance mandate, Larry Underkoffler wasn’t especially concerned. The temporary staffing firm, which he and his wife, Debbie, operate, had only about a dozen full-time staff, and the business already insured them. So, the requirement that companies with 50 or more employees would have to provide coverage for their workers or face a penalty didn’t seem relevant.

They soon learned otherwise.

Underkoffler said that, according to the law, all those temps who were being sent out to dozens of client businesses were now their responsibility under the ACA. North Georgia Staffing would have to offer insurance to them, since they boost the firm’s payroll to well over the 50-employee limit.

Underkoffler said he hasn’t completed the complex calculations to determine exactly how many employees the company will have to cover, but it’s more than 200, he estimates.

The company has decided that it can not offer them insurance. Instead, it will absorb the annual $2,000 per employee penalty when it kicks in come January 2015. The penalty is not tax deductible, either, while health insurance costs are.

Still, Underkoffler said the fine, which initially amounts to $166 a month per employee, is less costly than providing insurance, which he’s been told would cost $1,200 to $1,500 a month for family coverage. Employee-only coverage would cost about $800 per month.

Many factors influence the cost of group coverage, including the type of plan, the benefits and the age of the employees.

In a Mercer survey of employers, only 10 percent that do not currently offer coverage to all employees working 30 or more hours a week said they would pay the penalty.

Underkoffler said the firm also will be forced to drop coverage for the 20 or so office employees it now provides insurance for, as the rates for them will rise considerably.

Oddly, he said, there is a benefit to the business from the requirement. The company’s 50 or so regular clients won’t have to pay to insure the machine operators, welders, forklift drivers and assembly people that North Georgia Staffing provides. That makes hiring from a temp firm a good deal as it cuts their cost, he said.

“It’s good for our business in a way,” Underkoffler said.

Some of North Georgia Staffing’s clients, who themselves want to stay under 50 full-time employees, can simply contract with the company for temps when they get near 50. That allows them to avoid paying for insurance or the penalty.

Underkoffler said the firm will try to offset the cost of the penalty by increasing the hourly rate of the workers supplied to those clients.

“Like most things in the business costs area,” he said, “they eventually get passed on to the consumer.”

STILL WEIGHING HIS OPTIONS

Manuel’s Tavern

Employees: 57

Location: Atlanta

Business: Restaurant/tavern

By now, Brian Maloof figured he would have decided whether to offer health insurance to the staff at his restaurant. But after months of planning, he said, he still can’t figure how to do it and stay in business.

When the White House delayed to 2015 the $2,000-per-employee penalty on large employers who don’t offer coverage, it gave him another year to study things more.

“All that’s done is allow us another year to wallow,” he said, “unless, of course, the government takes that time to revise the law to make it possible to accomplish the admittedly worthwhile health-care goals without hurting and sometimes killing small businesses like Manuel’s.”

Restaurant owners, like retailers, face a tough situation, business analysts say. They operate on very low profit margins, making it hard for them to offer affordable insurance and still survive.

They also employ largely young and often transitory workforces who are not typically inclined to pay for health insurance. At the same time, older employees who may have more health issues and may be inclined to sign on for insurance can skew the insurance risk pool and drive up the cost for employer and employee alike.

Maloof, the second-generation owner of the well-known Atlanta institution, used to provide coverage for his employees, but dropped it after rates soared in the wake of some high-cost claims such as an esophageal cancer bout one worker endured.

With the equivalent of 57 full-time workers now, he would be required to offer it again, or pay the penalty. He’s not planning to cutback on his staff, or their hours, though.

“I want to do the right thing by the employees. But, at the same time, I want to keep the business going,” Maloof said. “Without the business, there are no employees.”

Maloof notified his regular customers earlier in the year that he had to raise some menu prices, in part to cover the anticipated higher cost to provide coverage. But that increase won’t bring in enough added revenue to cover the expense of health insurance. He can’t raise them much more, either, or he could lose business.

“It’s going to be mighty hard to compete if I have a $7 hot dog and somebody else has one for $3,” he said.

Many of his competitors don’t have to offer insurance because they are under the 50-employee limit or because they hold their staff to under 30 hours per week each.

If he split the cost of coverage with his workers, Maloof estimates, he would pay about $400 a month for each employee, with workers paying $400 each.

“I really want to do it,” he said. “But, at this time, I just don’t see mathematically how we can.”

REDUCING EMPLOYEE HOURS

AAA Parking

Employees: 1,600

Location: Atlanta

Business: Parking lot operator

One way some employers have said they will try to get around offering health insurance and avoid the penalty for not offering it is by reducing their number of workers to under 50 full-timers.

Another way is by reducing employee hours to an average of fewer than 30 a week so that they don’t qualify as full-time under the government’s regulations.

Business consultants have said that in very low-skill labor industries the strategy of going to more part-time employees can make sense. And several national restaurant and hospitality industry companies have said publicly they plan to follow the strategy.

One local company that said it is doing the same is AAA Parking. The Atlanta-based parking operator decided to cut the hours of about 250 of its 500 full-time hourly employees to fewer than 30 a week so that they would be counted as part-timers.

A Mercer study of employers on health care reform found that 12 percent of all businesses that responded said they would reduce employee hours to limit the number of workers they would have to offer insurance to under the ACA mandate.

Among employers in the retail and hospitality industries, 20 percent said they would cut hours.

AAA Parking confirmed that the potential negative financial impact on its business was the reason for its actions.

The company said that the employee coverage requirement would have cost it $1.2 million more a year, and that it would turn a profitable business into a money loser. Now it will be able to save that $1.2 million, although its overall health insurance costs will still rise by more than $300,000 annually.

AAA Parking, which has 1,600 employees total, added that it is continuing to pay for health insurance for 400 other full-timers, including salaried and hourly workers.

Spokesman Eric Garrison declined to comment further.