Peyton and Harry Shapiro, owners of Harry’s Roadhouse, the popular eatery on Old Las Vegas Highway, are among the many small businesses trying to navigate the mandates of the Affordable Care Act.
They’re right on the cusp. Because they have a few more than 50 full-time workers, they will be required to provide basic health insurance for employees, but not until 2015.
Meanwhile, all of their employees must buy health insurance by March 2014 or face a fine as high as 1 percent of gross income when they file their federal income tax returns.
The Shapiros have always provided health insurance to their full-time managers. However, Peyton Shapiro said that younger workers have not been interested, even if the business picked up half the cost of the monthly premium. Most of them are just not thinking about getting sick — and they don’t have a lot of cash sitting around for extras like insurance. “They’d rather have that money in their pocket,” she said. “But if people have to do it, I think they’ll do it.”
Last week, Peyton Shapiro distributed information to her employees on the New Mexico Health Insurance Exchange so they could begin to think about options. She said she will see how that goes and then consider what to do for 2015.
Shapiro said that in 21 years at Harry’s, the new law is her biggest challenge. “There’s been nothing quite like this. This is huge. It affects everybody.”
Since World War II, when wage and price controls were enacted to stabilize the economy, the bulk of health insurance has been provided through the workplace. It was impossible during the war years to increase pay, even though labor was in short supply due to combat deployments, so managers took to boosting benefits and insurance to attract workers — especially women with children. Health coverage offered by businesses became the norm, and between 1940 and 1960, the number of insured Americans grew from 20 million to 142 million.
When President Barack Obama and Congress passed the Affordable Care Act in March 2010, they were aware of the fact that business owners are more experienced consumers of insurance. Under the law, businesses with 50 or more full-time employees (at least 30 hours a week) have to provide health insurance or pay a fine — $2,000 to $3,000 annually per employee in the first few years.
Smaller firms do not need to provide insurance, but still must help individual employees with information so they can purchase it on their own.
Even though some of the penalties for not complying have been delayed a year, many business owners are moving now to take advantage of what the new insurance marketplaces have to offer.
“What I’ve been telling my employers is don’t press the snooze button,” said Anne Sperling, employee benefits manager with Daniels Insurance Inc. in Santa Fe. “You’d better be in compliance by January 2015. You don’t want to do this at the midnight hour. Get it all figured out so you’re not in a ‘gotcha’ phase and you don’t have enough time to change your prices or readjust your workforce so you can make it work.”
Even existing group insurance plans will change with new federal guidelines for coverage and affordability. For instance, no individual is expected to pay more than 9.5 percent of his or her gross income for total health costs — premiums, copays and out-of-pocket expenses. Any business that provides insurance has to meet the new measures — and even those that do not must provide workers with detailed information about the New Mexico Health Exchange.
Of course, nothing about the 2010 law is that easy. Santa Fe, for instance, has lots of businesses with part-time and temporary workers, and counting up hours to determine full-time equivalents is complicated.
For instance, a true seasonal employee like those at Ski Santa Fe do not count toward the 50 workers, unless they are hired back within six months. But resorts like Angel Fire, with an active summer and a winter workforce, have to count differently.
“Right now we are not making changes to our workforce,” said Krysty O’Quinn Ronchetti, an Angel Fire spokeswoman, in an email. “We are looking at different types of health care plans to help keep our premiums lower. There will be a financial impact, but since there are still moving parts to the bill [including the delay to 2015], we are riding out the wave until things are more set.”
Judy Ebbinghaus, owner of Santacafé, also has a lot of temporary workers — the restaurant is far more popular during the summer season, when it can offer an open patio with umbrellas and tables.
“Yes, we provide insurance now. We know it’s going to change and there are many ways it can change,” Ebbinghaus said. “We have tons of part-timers, a few full-timers and we’re still analyzing our situation. The complexity of administering this, the administrative burden of putting this on small business, is unconscionable,” she said. “I don’t know how we’re going to deal with it.”
Some large corporations share that view. Walgreens, Home Depot and a dozen other corporations will no longer cover employees — instead, they will pay the penalty and help workers buy insurance through the exchanges. Trader Joe’s will no longer provide insurance to part-timers, while United Parcel Service, IBM and Time Warner will no longer provide spousal coverage.
Eric Enfield, president of Architectural Alliance in Santa Fe, is a keen shopper of health insurance and recently attended a Santa Fe Chamber of Commerce workshop on the new law. Before the construction downturn, he provided health insurance to a dozen workers and said he spends 10 percent of his gross revenue on employee health care. He now has four workers, insures spouses and puts children on individual plans, which he said is a better deal. His company pays 90 percent of the monthly premiums.
“I believe in health care. I believe healthy employees are good employees, but I do shop,” he said. That means Architectural Alliance often changes companies and has had to reduce benefits elsewhere to pay premiums.
He believes the exchanges will be a better deal than what he is paying now — and he sees the larger insurance pool as a good thing to keep costs down. He is optimistic that the prices he has seen are better than what he is paying and that some of his employees will qualify for tax credits to pay part of their monthly premiums.
He’ll begin shopping next week and hopes to save some money.
“It’s made me think,” he said. “There is no harm in a small company going to the exchange. If they can get insurance, if they can qualify for the [credits], maybe that’s the more effective way to do it.”
But as companies weigh the pros and cons of carrying their own insurance or dropping it, Sperling and others are urging them to think long term.
She said employers may not follow through with insurance purchases — opting instead for more take-home pay. And most individual insurance buyers are ignorant about health insurance: What is co-insurance, what is a copay, what does maximum out-of-pocket mean?
“We have a ton of problems when it comes to insurance,” Sperling said. “People don’t know, it’s very confusing, they don’t understand the terms.”
Contact Bruce Krasnow at email@example.com.