Health Reform

Small Employers Struggle to Get a Grip on Obamacare


Andrew Matroni

Photograph by Taj Forer for Bloomberg Businessweek

Andrew Matroni

Andrew Matroni, owner of Queen City Catering in Charlotte, N.C., had no idea whether he’d have to buy a health plan next year for his 15 employees or face fines under the Affordable Care Act. At a March 28 panel hosted by the Charlotte Chamber of Commerce, he was relieved to learn he’s in the clear. “There are a lot of rumors out there,” Matroni says. “The biggest one: All businesses would need to do this or be penalized. I think that’s just a scare for everyone.”

Three years after Obamacare became law and less than nine months before its biggest reforms take effect, many employers still don’t grasp its basic elements. “They’re completely befuddled with who is subject to the penalty and what they’re going to have to pay,” says Craig Hasday, chief operating officer of Frenkel Benefits, a New York City insurance broker. Beginning in 2014, companies that don’t offer insurance face penalties of up to $2,000 per employee. This mandate applies only to businesses with 50 or more people who work upwards of 30 hours a week. That makes 96 percent of employers exempt. Yet a majority of business owners with fewer than 50 workers believe the mandate applies to them, according to a recent survey of 259 companies by online insurance marketplace EHealth.

Large businesses are concerned about fines, too. Those who comply with the mandate can still be fined if their plans cost workers more than 9.5 percent of their income, or if their insurance doesn’t cover at least 60 percent of medical costs. “Not doing this correctly could have staggering penalties,” with some companies potentially owing tens of millions, says David Marini, vice president of strategic advisory services at payroll provider ADP. That’s a real concern for big employers with low-wage workers, such as restaurant and retail chains that often offer skimpy coverage. But Frenkel’s Hasday also says he talks to clients that offer rich benefits, like law firms, who don’t realize their plans will pass muster. “Everyone at the end of the day thinks they’re going to pay money,” he says.

Many business owners tuned out last year as the Supreme Court weighed whether to throw out the law and Mitt Romney vowed to repeal it if he became president. Attack ads have also caused confusion. In the 2010 and 2012 elections, the U.S. Chamber of Commerce ran ads saying health reform is “crushing small businesses with billions in penalties” and “will kill jobs across America.” After the high court upheld the law, Republican Governor Rick Scott of Florida told Fox News (NWS) it was “the biggest job killer ever,” citing a company in his state with 20 employees that expected to fold because it couldn’t afford coverage. Scott, whose office didn’t respond to requests for comment, changed his position on one aspect of Obamacare this year and agreed to expand Medicaid in his state as the law calls for.

The “depth of misinformation” among employers is significant, says Michael Lujan, director of sales and marketing for Covered California, the state’s insurance exchange, where companies with fewer than 50 workers can shop for health plans starting this fall. “They’ve had three years to sort of, kind of, barely understand the headlines, the sound bites, and a lot of them in the media were incorrect, definitely partisan,” he says. Lujan’s exchange is beginning to set up workshops and online campaigns, part of a $3 million effort to educate businesses and help them enroll.

Becca Pearce, executive director at the Maryland Health Benefit Exchange, says many companies with fewer than 25 workers don’t realize that if they offer plans, they may qualify for tax credits. She’s spreading the word speaking to chambers of commerce and expects to have 20 people by the summer to help small employers navigate the new marketplace. (The federal government does spell out the basics at healthcare.gov/using-insurance/employers.)

Most states aren’t as far along with the exchanges, and companies are running out of time to catch up. Says John O’Connell, co-owner of benefits broker C.M. Smith Agency in Glastonbury, Conn.: “There really isn’t a lot of runway here to land a plane for 1/1/14.”

The bottom line: The portion of U.S. employers who are exempt from providing insurance under Obamacare is 96 percent. Many don’t realize it.

John_tozzi
Tozzi is a reporter for Bloomberg Businessweek in New York.

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