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With the implementation of parts of the Affordable Care Act, also known as Obamacare, less than six months away, some who work with local business owners say there is still confusion as to how they will be affected.
Paige Brown, executive director of the Gallatin Area Chamber of Commerce, said many local business owners are starting to worry about the federal mandate.
“Everyone is concerned,” Brown said. “They still don’t understand how it’s going to impact them and how to prepare, and I still think people are in a wait-and-see mode.”
Dale Payne, owner of Sumner Roofing and Exteriors, employs 15 people, and currently offers health insurance benefits. He plans to meet with advisors in the next few weeks to get more information on how the new health care law could affect his small business.
“To be honest, I don’t know enough about it at this point,” Payne said. “Nothing that I have seen is really clear and straight to the point.”
That uncertainly, Brown said, could be putting local businesses in a holding pattern.
“I think it’s stagnating growth for them, because they are afraid,” Brown said. “Everybody is kind of in sticker shock over the increase in (insurance) premiums this year, and they don’t understand what it’s going to cost them. There are still so many unknowns.”
All of that could have a negative impact on the local economy, Brown said.
“It hurts our economy, because people are afraid to hire,” she said. “They are afraid to take out a loan to grow their business. There’s still a level of discomfort — and probably will be for several years.
“I think there are people who feel like it’s a good thing for individuals, but right now it feels like an incredible burden for businesses.”
While much is still unclear, there are some certainties about the Affordable Care Act, though parts of the law are subject to change.
Effective Jan. 1, 2014, all individuals are expected to be covered under some type of medical health insurance policy. According to the IRS website, failure to do so would result in fines when filing 2014 tax returns.
Current projections are that the first-year fine for an individual would be about $95, according to the Kaiser Family Foundation in Washington, D.C., with a maximum penalty of $285 per family.
In the second part of the mandate, which is referred to as “shared responsibilities,” all businesses with 50 or more full-time (30 hours a week or more) employees must provide insurance benefits to employees by January 2015 or face a penalty of $2,000 per employee beyond the first 30 employees, which will also be imposed by the IRS.
In addition, as the law is now structured, an employer will be fined $3,000 for each of its employees who pay more than 9.5 percent of his or her annual W-2 wages toward healthcare premiums. Such employees will qualify for government subsidy.
Individuals with pre-existing conditions can no longer be denied insurance, and employers will not be allowed to have an employee wait longer than 90 days to be insured.
Learning the law
Charles Alexander, director of the Tennessee Small Business Development Center at Volunteer State Community College, works with approximately 200 local small businesses each year. While some of the larger businesses have started to look at some of the requirements under the new healthcare law, he said many smaller business owners are just now starting to learn about how the changes will affect them.
“Up until a month ago, I wasn’t hearing anything,” Alexander said. “It was eerily quiet, and any time you wanted to discuss it, they (business owners) were in a wait-and-see mode. There was not a lot of belief the requirements would go through.”
Alexander said a recent TSBDC workshop on healthcare reform drew a crowd of business owners seeking additional information, although it’s still unclear how applications of the new law will play out locally.
“I don’t know if we will see mass layoffs, or if everybody will decide to get insurance, or if employers will end up paying the penalty,” Alexander said. A lot depends on the number of businesses that do not currently offer health insurance, he said.
“Most likely, those that do not will simply pay the penalty, which is $2,000 on every employee over (the first 30 employees),” Alexander said.
Based on those numbers, Alexander said if a company has 100 employees, they would be required by federal mandate to pay $2,000 each for 70 employees, which would be $140,000 in penalties.
“Some of them have already had to tighten their last belt loop, and what I think we are going to see is folks getting moved to part-time (hours), some layoffs, and potentially, I think some employers will try to take a few of their employees and turn them into 1099 contract workers,” Alexander said, adding there might be smaller employers now offering insurance who will decide to drop it, since it could be cheaper to pay the penalty and allow their employees to get on the Health Insurance Marketplace exchange.
Questions remain
Jason Humphrey, with Heritage Financial Group in Hendersonville, an employee benefits firm for group clients, led the first workshop at TSBDC and hears the same confusion among business owners.
“What I am learning is there is a lack of communication and understanding among small business owners and really, since the law passed, you almost have to be a nerd to really wrap (your mind) around it because it changes all the time,” Humphrey said. “It seems like every other Friday, there is a delay or a change. It’s almost like trying to hit a moving target.”
Humphrey agreed with Alexander, saying that many business owners would likely opt to pay the penalty rather than offer the mandated insurance.
“You will have some that will sit down and calculate the penalties they will incur versus what they will pay if they do offer coverage, and they will look at the cheapest option for them,” Humphrey said.
It’s not just those small businesses that will be affected by the new healthcare reform, Humphrey said.
“The laws will affect both large and small businesses,” Humphrey said. “I foresee premiums going up across the board. The (insurance) plans going forth are guaranteed issues with no exclusions. All those things sound great and fine, but there’s going to be a price for that.”
As of Oct. 1, open enrollment for the health insurance marketplace or exchange is planned to be online for residents. In Tennessee, officials have opted out of a state partnership exchange. Local residents will choose from the federally facilitated health care exchange, along with 25 other states.
“There is so much we still don’t know about the (insurance) plan design and the network and pricing,” Humphrey said. “We are kind of at the mercy of the federal government as far as information on the process and it’s going to be hard for people that don’t have the knowledge.”
Some in the medical community believe they will have a role in educating patients in the upcoming months.
“We plan to do all we can, within legal and regulatory parameters, to help our uninsured patients to secure healthcare coverage through the exchange marketplace,” said Susan Peach, CEO of HighPoint Health System, which includes Sumner Regional Medical Center. “The CMS (Center for Medicare/Medicaid Services) is expected to issue a final rule very soon that will help us better understand the role we can play in helping our patients.”
Alexander said the next small business workshop will be held Thursday, Aug. 22 at 3 p. m. For more information or to register, visit volstate.edu/TSBDC.
Contact Sherry Mitchell at 575-7117 orshmitchell@mtcngroup.com.
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