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What's the Employer's Plan for ACA?

indexKENTUCKY (1/27/14) – The Affordable Care Act is causing employers to consider a number of strategies so as to be in compliance.

Larger employers provide health insurance for employees and some include families.

The employee usually has to contribute to the cost of the plan plus pay their co-pay and deductible.

Co-pays tend to range from $10 to $30 for each office visit. 

The deductible of an insurance policy is what the patient must spend before insurance kicks in.

Deductibles have risen in recent years as health insurance plan costs have escalated.

Employers have used a health insurance benefit to attract more skilled and dedicated employees.

The 40 hour work week equals 173.33 hours per month.  A health care plan that costs $300 per month equals a $1.73 per hour benefit.

This would add almost 22 percent to the hourly wage of a person making $8 per hour.

This 22 percent is in addition to other employer costs for workers compensation insurance, matching Social Security and Medicare, and unemployment insurance (both state and federal).  Vacation and holiday benefits can add another 2 percent to 6 percent to employee costs.

The lower the pay of the employee, the greater the percentage cost impact to the employer.

Typically the lower paid employees have less education, fewer skills and less experience. These employees do not often enjoy many benefits especially health insurance.

Now with the ACA, employers are exploring their options.

The employers we spoke with did so with the understanding that they were off the record. 

The options seemed to fall out into five categories.

  1. Provide the Insurance – Most businesses are expected to provide employee health insurance coverage and charge the employee (up to 9.5% of employee’s pay) to help pay the premium cost.  One employer thought that his lower paid employees would decline coverage and go to the exchange.  This would be particularly true if the employee qualified for a subsidy.
  2. Outsourcing Labor - One business with slightly over 50 employees was looking at ways to get their head count below 50.  “I am even looking at offering one group of employees the option of being an independent subcontractor.  I will do that if I cannot afford the insurance package.”  
  3. Go to Part Time Schedule - Another business with well over 50 employees will change their work schedule.  A supervisor told SurfKY News, “We plan to change our manufacturing to 60 hours per week.  As long as we keep an individual’s hours below 30 hours per week, we will not have to provide insurance.  If we work 6 - tens, shift A will work 7 to 5 Monday through Wednesday and Shift B will work 7 to 5 Thursday through Saturday.  When you take 30 minutes off for lunch, that keeps everyone at 28.5 hours per week.”  Another manager said that he may do the same thing “I wouldn’t be surprised to see a lot of companies doing this.  If you have several companies working this schedule, you will get into an ad-hoc employee sharing especially in food service and retail.”
  4. Outsource Labor Overseas - A plant manager of a large multi-national company said that his company can reallocate production between several manufacturing facilities around the world.  “If our costs get too great in one location, we can shift production to another location.  Management is keeping close tabs on labor costs and our investments follow reliable, qualified, low-cost labor.”  He said.  “I don’t think we know what our health insurance cost will be at this facility.  Talks of a higher minimum wage are a big concern to me.  We pay well above minimum (wage); but, we have to stay well above minimum to keep our people happy.  I think we would lose at least one production line if minimum is increased.”  
  5. Automation - Another option being considered by several companies is to automate the repetitious, mundane jobs.  One small business owner told SurfKY News “I have 45 employees and I pay half their health insurance.  My oldest employee is 51 years old and he is one of a handful that takes the insurance.  I think my business will pick up in 2014.  I can upgrade to higher capacity machines and I can automate several functions.  Taking these steps, I can do quite a bit more business and keep my headcount under 50.”  
Companies are taking a “wait and see” approach on the Affordable Care Act. Once they have a clear vision of their options, they will be ready to take the steps necessary to survive.

Ron Sanders
SurfKY News

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