Health care overhaul's impact on small businesses topic of Petaluma event
Published: Friday, June 14, 2013 at 5:48 p.m.
Last Modified: Friday, June 14, 2013 at 5:48 p.m.
Small business owners and managers got a jaw-dropping glimpse Friday of what they need to know to comply with President Obama's health care overhaul next year.
For some, the conference at the Sheraton Sonoma County in Petaluma was enough to make their heads spin, while others described the session as headache-inducing but necessary.
Organized by the North Bay Leadership Council, the event was aimed at providing small businesses with practical information about the new legal requirements under Obamacare, which seeks to expand health coverage to 30 to 33 million Americans.
For small businesses that currently offer health insurance to employees, the law could change the types of insurance they are required to offer.
“You can't just go by what you have been doing,” said Cynthia Murray, president and CEO of the North Bay Leadership Council.
Sharp increases in the cost of health insurance should ease somewhat with the creation of health insurance exchanges, like Covered California, several experts said. But the exchanges are not expected to trigger dramatic decreases in rates, said Mike Lujan, director of sales and marketing for Covered California.
“If anyone expects insurance premiums to be half of what they used to be, they won't,” said Lujan.
Under the law, all Americans, with some exceptions, will be required to purchase a minimum amount of health coverage or face a tax. Subsidies will be available to those who cannot afford coverage.
Employers with fewer than 50 workers will be exempt from having to provide health insurance to their employees.
About half of the workers in Sonoma County are employed at such firms, according to data from the state Employment Development Department.
Nationwide, about half the businesses with fewer than 50 employees provide health coverage to workers and half do not, said David Chase, California outreach coordinator for Small Business Majority, a national research and advocacy group.
Companies with more than 50 employees must provide insurance to their workers or face an annual fine of $2,000 per full-time worker, minus the first 30.
“That's the sledgehammer penalty,” said Jennifer Lunski, an attorney with San Francisco-based Woodruff, Sawyer & Company, which provides employers with insurance services.
Employers must reassess their workforce because the law includes specific formulas on how a business should calculate the size of its workforce, she said. That calculation is based on full-time equivalents, or FTEs, and each person working more than 30 hours is considered one FTE.
A small business could have far fewer than 50 full-time employees but still be required to provide insurance because of the amount of work done by part-time employees. Lunski gave the example of an employer who has 20 full-time employees and 40 part-time employees who each average about 90 hours of work every month.
The total monthly hours worked by the 40 employees, 3,600 hours, is then divided by 120 to get the total FTE figure. In this case, the total number of FTEs is 50 — the 20 full-time workers plus 30 FTEs derived from the formula.
During the panel discussions, members of the audience were allowed to ask questions by writing them down on a card. One question asked, “I have 53 employees. What incentive is there for me to not simply reduce my workforce.”
“There are anti-abuse provisions in the law,” said Lunski, drawing chuckles and soft moans from the audience.
The success or failure of Obamacare will be measured by its ability to restrain rising health care costs that have skyrocketed for small employers, Chase said.
These costs have doubled over the past decade, rising at a rate five times that of inflation. Without reform, small business health care costs will more than double by 2018 to $2.4 trillion, or $243 billion in California, the Small Business Majority estimated.
Among those who attended the conference was Jenay Cottrell, executive director of a small nonprofit that provides visitation services to Marin County residents who live in long-term care facilities.
Cottrell said she attended the conference to get more information about insurance offered through the California Covered exchange. Her husband also recently started a business and she wanted to find out what will be available to him and his partner.
“Our hope is that for his business, they would have access through the exchanges to more affordable coverage,” Cottrell said.
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