The next big step in the federal governments health insurance overhaul will kick in soon, but many business owners are still struggling to understand what it means for them.
Under the 2010 Affordable Care Act, as of Oct. 1, health insurance will be available to individuals and small businesses through an exchange, sometimes called a health insurance marketplace.
While the portion of the law mandating that large employers -- those with 50 or more workers -- provide health insurance has been delayed until 2014, all businesses still need to be prepared.
Businesses with fewer than 50 workers -- considered a small business under the law -- are not required to provide insurance.
One of the big issues facing all businesses is determining whos an employee as defined by the new law.
There is a huge issue about people who are treated as your employees, but you are calling them independent contractors or consultants or leased employees, and whether you have to count them and their hours to determine if the business falls under the 50-employee limit, said Pepper Crutcher Jr., a partner with the Balch & Bingham law firm in Mississippi.
Crutcher, who leads the firms Affordable Care Act compliance practice, spent a year researching the law and has been traveling around the country giving presentations.
Large employers also have to know whether to count those employees -- contractors or consultants -- as people who you owe a duty to offer coverage, or (the company may have to) pay the associated taxes and penalties, he said.
For example, a contracted worker -- not counted as a company employee -- could go to an insurance exchange after Oct. 1 and buy a qualified plan. In order to get a government subsidy, that worker would need to claim to be a full-time employee of that company.
If that happened, In 2016, you (the company) are going to get a big surprise, Crutcher said. You are going to get this tax assessment of $2,000 per year times all of your full-time employees. Why? Because the government is going to have your 1099 (forms) that you sent in for compensation paid that employee, and the government is going to have the exchange certification that the person is a full-time employee of yours.
And not only may you get a ... tax assessment, you may also get a withholding tax investigation, so they can figure out how many other employees you havent been paying withholding taxes for.
Even part-time workers may not be counted right, he said.
The regulations say you dont just count work hours, you count nonwork hours such as vacation, holidays, Family Leave Act leave, military leave, jury duty leave, whether or not those are paid, he said.
The law also counts the hours the part-time workers were scheduled to work in a given time period -- even if they didnt work, he said.
So, when you think you are small, get some professional advice about whether you are correct or not, Crutcher said. It may turn out you are on the bubble and you have things you can do in the next months that will preserve your smallness, and if they arent attended to will make you an applicable large employer. Then, when the employer mandate does kick in, youve got obligations you didnt need to have.
Fifty is the magic number. You dont want to be that employer that is over by one.
Theres worry in some quarters that the so-called 49er strategy could dampen business growth.
I have a client who had just over 50, and they cut people to get under, Crutcher said. Thats going on.
One reason a business would want to stay under 50 employees on average during the year is because it would either have to offer affordable qualifying coverage for at least 95 percent of its full-time employees and their dependants or it would have to pay annual nondeductible taxes.
And while Crutcher said he believes most of the people writing the regulations in Washington had good intentions, he has concerns about them.
If you think the act is actually designed to provide more access to insurance and care, with better quality at better prices, then I think there is grave doubt about whether it can possibly work.
Midstate business owners worried
Businesses large and small are dealing with the new insurance law in different ways.
Brigitte Moten, director of marketing and human resources with Geotechnical and Environmental Consultants Inc. in Macon, said she is working with their insurance broker to try to figure out what the company needs to do.
They are much more knowable about all the different things that might affect us, Moten said. We are right below the threshold because we are below 50.
The company has 44 full-time workers and three part-time workers. It has always offered insurance to its full-time workers.
We are depending on our broker to guide us through the process, she said.
On the other hand, Terry Tiller, CEO and general manager of Riverside Ford, said hes been trying to concentrate on his business following the most recent recession and is not totally prepared for the health insurance changes.
Honestly, I worry about it a lot, he said. Im just sort of in a quandary about the whole thing.
Riverside Ford has 97 full-time employees and about 25 part-time workers. The company provides insurance and pays a portion of employee premiums.
Tiller said his business is just beginning to pick up.
Everybody fell off the cliff in 08, and we are just starting to have a good year this year, and I guess Im concentrating a little more on that. ... If Im lying awake worried about (the new law), Im sure my customers are, too.
Chuck Stroud, owner and president of Macon-based Stroud and Co. general contractors, said the new law hasnt really affected us yet. But its a real disincentive for us to grow past 50 people.
Stroud has about 20 full-time workers, and it provides insurance to them. The company pays half the premium and the employee pays half. He plans to continue with that coverage unless it comes to some astronomical number. I dont want to not do that.
If rates go up so much that employees cant afford their portion, they may elect to get insurance through the exchange.
If enough do that, we wont have enough (people) to participate in a group plan, he said. Ive been in business 25 years, and weve always offered insurance in some fashion.
The company hires subcontractors, but they are not really our direct employees, he said. When I hire a plumbing company, I have a contract with the company and they have multiple employees. Those people cant be assigned to me.
Since the Internal Revenue Service will administer the insurance plan, Stroud said he plans to get advice from his accountant about what, if anything, he needs to do.
Andy Nations, president and CEO of B&D Industrial, which has 280 full-time workers, said he believe hes prepared because he is self-insured.
Our plan is already pretty much in compliance, he said.
While he deals with an insurance broker for advice, I think there is still a lot of uncertainty.
Larry Pearce, co-owner of an Ace Hardware store in Byron, said he has nine full-time and part-time workers and he doesnt provide health insurance.
We might plan on it one day, but right now we cant, he said.
Harry Bowen, owner of Bowen Brothers Clothiers in downtown Macon, said his business offers health insurance to its workers. It now has six employees, three full time and three part time.
When times were good, we used to pay 100 percent of the premium, Bowen said. Now: Zero. But we have not cut hours and not missed a payday.
He said he needs to learn more about the new law.
I thought we would receive something from the government letting us know what we needed to do, he said.
Crutcher advises businesses to talk to their insurance brokers or agents now to make sure employees are classified correctly.
Get your misclassifications fixed by Oct. 1 before your employees start running to the exchange to buy their (insurance) coverage, he said.
To contact writer Linda S. Morris, call 744-4223