This article serves as one of many resources to be considered when evaluating the Affordable Care Act’s implications. It does not represent advice from the International Carwash Association regarding the Affordable Care Act.
“The Affordable Care Act (ACA) and health care reform requirements don’t apply to me.”
Unfortunately, this perception by small business owners is a huge mistake, according to Sheryl Southwick, director of compliance for TriNet, a human resources service and consulting organization. The one-year delay requiring employers to provide coverage to employees or the perception that employers with fewer than 50 employees are not affected are two reasons small business owners do not think the law applies to them. However, the reality is that business owners do have some 2014 requirements and should be planning now for upcoming 2015 requirements.
Although business owners who employ 50 or more full-time equivalents (FTEs) are not required to provide health insurance coverage until January 2015, there are a number of actions all employers must take in 2014, Southwick said. Employers who currently offer health care coverage to employees must give employees notices that include a summary of benefits and coverage offered by the business during open enrollment period. Employers who don’t offer coverage must provide information about the opportunity to purchase coverage through the health insurance marketplace at healthcare.gov.
The requirement to distribute these notices is ongoing because they must also be given to new hires within 14 days of employment, Southwick added. “Another change that is required for employers who offer coverage is a maximum waiting period of 90 days for acceptance into the company plan,” she said. “We still see some small businesses with four- to six-month waiting periods that must be changed.”
PREPARE FOR CHANGES AHEAD
It is not surprising that business owners are confused because ACA requirements have been “a moving target for several years,” said Evan Porges, co-owner of Prime Shine Car Wash in Modesto, Calif. While there have been reports of companies reducing employees’ hours so they are not classified as full-time to avoid paying for health care coverage, Porges said his company has no plans to reduce hours or benefits for Prime Shine’s 130 employees who will renew their insurance coverage in February. “We pay 75 percent of the health care premiums for our managers and administrative or service people, which is just over 50 people,” he said. “We also offer supplemental health insurance to our 80 frontline employees.” According to estimates provided by his insurance company, Porges expects rates to increase by 11 percent. “We’ll absorb the extra expense because it’s the cost of doing business, and it helps us keep good employees in our company.”
Premiums for insurance coverage are likely to change for most businesses as exclusions for pre-existing conditions are dropped and services that may not have been included in previous policies are added to meet ACA requirements. “Business owners should be working with their insurance or human resource partners now to plan for changes that have financial implications for the business,” Southwick said. Even though the penalties for non-compliance will not kick in until 2015, the numbers on which the penalties are calculated are based on employment records for 2013, she pointed out. “Small business owners need to make sure they have time and attendance systems or payroll services that can collect and document the average number of hours worked per employee.”
Because the data on which compliance or penalties will be determined is retroactive, employers who are near the 50-FTE threshold and are planning expansion of the workforce in 2014 or beyond will need to factor the additional health care expense into financial projections. Be careful about classifying new or existing employees as contractors to avoid the full-time designation, Southwick warned. “If the contractor is performing the same work that was performed as a full-time employee, the company will be violating Internal Revenue Service guidelines,” she pointed out.
CREATE A CLEAR GAME PLAN
If a business owner has several locations or different small businesses, it’s important to note that they are all classified as one entity for ACA regulations if the business ownership is the same for all. This is the situation faced by Jeny Nieuwenhuis and her brother, Jay, who own REI Engineering and Northwest Petroleum Service in Wausau, Wisc. The engineering firm employs 37 people, and the petroleum equipment firm employs 26 for a total of 63 employees. “Because the ownership of both companies is shared by the same people, we do exceed the 50-plus employee threshold,” Jeny Nieuwenhuis said. Both companies have always offered health insurance coverage to all employees and subsidized 80 percent of the premium cost. “We have preliminary quotes that our premiums will increase 22 percent,” she said.
To find the most cost-effective coverage and obtain the most accurate estimate, Nieuwenhuis has asked all employees to complete a comprehensive health history report, and her insurance broker is working with six companies for a quote on the insurance. “It required extra work for our team members, even the ones who will opt out of our plan, but we believed this was the best approach so we can have accurate quotes as we decide which insurance company to choose.”
Throughout the year, Nieuwenhuis’ employees have been kept up to date on the companies’ efforts to stay on top of ACA requirements and to obtain qualified health care coverage that is economically feasible for both the business owners and employees. This is an important step to reducing anxiety and confusion for employees, said Audrey Boone Tillman, vice president of corporate services for Aflac. “One of the most common mistakes we’re seeing is lack of benefits communication between employers and employees,” Tillman said. The reason for this mistake is probably the employer’s misunderstanding or lack of information about the regulations, she said.
In fact, only 4 percent of small business employers understand the health care reform mandates included in the Affordable Care Act, and 28 percent of employees are confused, worried or unsure about the changes their employers are making to health care coverage and benefits to comply with mandates, according to the 2013 Aflac WorkForces Report.
“Educate yourself,” Nieuwenhuis said. “Work with your insurance broker to identify options, which include multiple insurance companies and plans that will work for your business.” She also suggested talking with similar small businesses to identify best practices, attending seminars and joining industry groups that are discussing health care reform.
“The earlier companies can prepare for changes and fully understand their implications, the better,” Tillman said. For small businesses, the HR responsibilities may be managed by only one or two employees, so it takes time to understand the requirements and communicate changes. Although some small businesses have taken a “wait-and-see attitude” and indicated that they may just plan to pay penalties due to the financial burden providing insurance will place on their small business, this is not a wise approach, Tillman warned. Because premium costs for 2015 as well as penalty amounts are unknown, no one can put a number on the potential financial implications for non-compliance, she said.
Don’t wait to begin planning for employer mandates, recommended Southwick. It will take time to evaluate existing coverage, shop for more cost-effective insurance, educate employees and budget for 2015. “Business owners cannot budget for upcoming years based on previous years’ expenses because health care coverage requirements have changed for everyone.”
