Area Businesses Brace For ObamaCare’s Impact
OCEAN CITY -- With the mandated Affordable Health Care Act, or ObamaCare, deadline still almost a year away, Ocean City business leaders this week got a primer on what the changes might mean to them, but because of the seasonal nature of the resort and the wildly fluctuating employee totals, the solution still appears to be as clear as mud.
Chris Carroll, vice president of Atlantic-Smith-Cropper and Deeley Insurance, this week presented a primer of sorts on the ins and outs of the Affordable Care Act (ACA) to members of the Ocean City Economic Development Committee (EDC). The ACA, referred to by many as ObamaCare, is complicated and reads like an inches-thick tome on tax law, but in its simplest terms, the act requires all Americans to obtain healthcare insurance from one of a variety of sources by January 2014.
Some will be able to find affordable health insurance on their own, while others will be covered by an expanded Medicaid program based on earnings in relation to the poverty level. Most, however, will be covered by mandated plans offered through their employers.
It’s complicated, but essentially, large employers, or those with 50 more full-time employees or the equivalent, will be faced with the decision to offer affordable health insurance to their staffs, called the “play” option, or be faced with significant financial penalties in lieu of offering insurance, or the so-called “pay” option.
“Large employers will have to decide to ‘pay or play,’” Carroll told the EDC this week. “They can offer a plan that’s affordable to their full-time employees, or opt to pay the penalty. In either case, there will be considerable added expense for large employers.”
For large employers opting to pay instead of play, the cost will be substantial. For example, the penalty for not offering an affordable health insurance plan comes in at $2,000 per employee per year, or about $166.66 per employee per month. With either option representing a significant added expense, Carroll this week urged resort business leaders to start preparing for the inevitable.
“January 2014 seems like such a long way off, but we’re here now,” he said. “What do we do now as far as planning? Large employers with 50 or more employees will be asked to pay their share, whether by providing insurance or paying a penalty.”
Most resort area businesses see their payrolls balloon during the summer season and drop back down during the off-season months. Many subsidize their core full-time staffs with part-timers during the hectic summer season, but even those could be combined to account for more full-timers.
Carroll explained the definition of a full-time employee is somewhat complicated in terms of what it means for the ACA. In its simplest terms, a full-time employee is one who works 130 hours per month. In terms of the ACA definition, two part-time employees who work a combined 60 hours per month will be considered one full-time employee.
There are creative ways of getting around the large employer designation, but almost none of them are attractive. Most obviously, employers can carefully manage the productive hours of their employees, which most successful business owners and managers do anyway. Otherwise, they could limit the hours per shift, or cut out shifts altogether and make do with less, or limit the hours of operation. Most of the latter appear to run counter to running a successful seasonal business and could result in a diminished quality of service or product.
“Are there ways of avoiding being a large employer?” said Carroll. “There is really not much of a way to get around it short of being open less or getting by with fewer employees.”
While some area businesses certainly have staffs well over the 50-employee threshold for large employers, many are mom-and-pop operations with far fewer employees than 50. Nonetheless, Carroll said on Wednesday the smaller business owners should be just as much in tune with the federal and state mandates as their large employer brethren.
“Small employers will be absolutely affected by this,” he said. “They won’t be required to share in the expense, but will need to be carefully planning to avoid crossing over that threshold to a large employer.”
In a typical Ocean City seasonal business, employers bulk up their staffs well beyond the 50-employee limit for classification as a large employer, but often only for 90 days to 120 days. After that, many drop down well below the small employer threshold, or even close for the season altogether. It’s a seasonal situation that complicates the requirements of the ACA.
“If you’re a large employer for three or four months and every month the rest of the year you’re a small employer, you’ll probably be eligible for a season employer exception,” said Carroll. “The caveat is, if you’re a large employer in May and a large employer in September, you’re probably going to be considered a large employer.”