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BUSINESS
Nation Now

Businesses tackle the Obamacare equation

Lisa Bernard-Kuhn
The Cincinnati Enquirer
David Tramontana's firm has spend thousands of dollars hiring consultants to walk him through the ins and outs of complying with new rules under the Affordable Care Act.

CINCINNATI — David Tramontana is still crunching the numbers.

His firm has spent thousands of dollars hiring consultants to walk him through the ins and outs of complying with new rules on the horizon under health reform.

"It's very complicated," said Tramontana, CEO and owner of Sycamore Township, Ohio-based Home Care by Black Stone, which has more than 1,000 full- and part-time employees.

Across the country, large employers like Black Stone are hustling to comply with requirements of the Patient Protection and Affordable Care Act that are set to move into full swing in 2015. The law, known commonly as Obamacare, puts into place financial penalties for businesses with 50 or more full-time employees that fail to make affordable health insurance available. A cornerstone of the act, the provision is among the most controversial in the law. Objections from employers and policymakers led the Obama administration to delay the mandate, originally set to kick in this year.

Starting in 2015, businesses with 100 or more employees will need to start providing health benefits to at least 70% of their full-time workers. The number rises to 95% by 2016. Firms that fail to meet the targets face penalties that start at $2,000 per employee. Businesses with 50 to 99 full-time employees will need to start insuring workers by 2016.

"Compliance is a major concern," said Jim Beatrice, vice president of Business Benefits Insurance Solutions. "The most important thing, first of all, is for employers to know whether they're subject to the mandate. I think there are many employers that aren't sure."

Part of the challenge, Beatrice said, is Obamacare's definition of full-time employee: 30 hours a week or more, versus the historic 40 hour week recognized by other federal and state laws. The law also requires employers to collect signed waivers from employees who opt not to sign on to a company insurance plan. Even for employers who opt not to offer insurance, the paperwork substantiating the number of full-time and part-time workers is required.

That means most businesses will need to invest in ways to document that they are complying with the new rules.

"Businesses will have to track the part-timers to make sure that they don't average more than 30 hours a week or more, and they must be able to substantiate (to the federal government) that they have in fact offered coverage to those that qualify," Beatrice said. "Businesses are going to have to figure out that process, which can be a bit of a hassle."

Holding off on big decisions to calculate the impact

As employers wrestle to understand how to comply, many are holding off on new investments.

"Employers are telling the chamber they will not add jobs to cross the 50 employee threshold to avoid the added costs and penalties associated with the mandate," said Matt Davis, senior vice president of government affairs at the Cincinnati USA Regional Chamber. "The chamber will continue to encourage a delay in implementation until the law is reformed to support job growth."

Some businesses also are capping part-time workers to fewer than 30 hours a week. Others are holding off on new hires altogether while they assess the impact.

"We're in a holding pattern," said Jim Moehring, co-owner of Cincinnati-area Holy Grail and Popeye restaurants, which employs more than 80 and 130 full-time and part-time workers, respectively.

"Is it going to be a 2%, 3%, 6% impact? We have no idea," Moehring said. "We've definitely put any expansion plans on hold until we have a clearer picture. It's incredibly frustrating, and it's already been an expensive process when I think about the (cost of) the consultants we've hired and seminars we've attended to understand all of this."

Some employers are concerned that mandating health-insurance coverage will limit the ability of companies to use richer health benefits as a tool to attract top talent.

"Health care serves as a vital and powerful tool for employee retention and recruitment," said Denny Reidmiller, CEO of Reidmiller & Associates, a benefits consultant. "However, the younger (employer) groups are feeling a new dynamic in higher costs. Historically, employer groups with predominantly single males in their 20s could (have a) policy for as little as a $100 to $200 a month. All that has changed to a doubling or tripling of the cost."

Big risks for firms that don't comply with rules

For large employers that miscalculate how many employees should be offered health insurance, the penalty could be pricey.

In Ohio, penalties to employers were estimated to be as much as $88 million in the first year of the mandate, according to a Jackson Hewitt study.

At Black Stone, many employees earn on average $10 an hour or less, so their health benefits could be picked up under the recently expanded Medicaid program. The company will be off the hook for paying any penalties for those workers.

Still, Tramontana estimates that the firm has more than 300 home health aides who would qualify for insurance his firm expects to offer next year to avoid fines. To offer insurance to those employees, Tramontana is looking at a more than a $1.5 million investment, or $5,000 per worker.

"We also asked if we could afford to just pay the penalty, and the answer clearly was no," Tramontana said.

Companies with 100 or more employees that don't offer coverage may be liable for fines of $2,000 and $3,000 per worker starting next year. The rules kick in for businesses with 50 or more employees in 2016.

For businesses that fall under the mandate, if any one employee receives a premium tax credit from the new online marketplace because coverage is either unaffordable or does not cover 60% of total costs, the employer must pay either $3,000 for each employee getting a credit or $750 for each of their full-time employees, whichever is less.

"Employers are beginning to understand the math better today than they were a year ago, and many are opting not to just pay the penalties," Beatrice said. "They would rather get something for their money than just hand over the fines."

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