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Health insurance changes daunting for Indiana employers

January 19, 2013

A portion of the Patient Protection and Affordable Care Act requiring companies in 2014 to begin offering health insurance to more workers is causing a lot of anxiety for many local employers.

The 2010 law creates fines for employers that do not sponsor certain levels of health benefits for employees working at least 30 hours per week. But the law also creates online health insurance exchanges to offer workers coverage instead of their having to rely on employers.

The changes could translate to huge expenses for companies wrestling over whether to provide health benefits to a crop of workers that typically isn’t eligible for most company plans.

Another option tossed around by some employers is to simply cut the hours of employees to below 30 per week to avoid the extra cost of coverage.

Either way, they have big decisions to make.

“This is a very, very big challenge for the company, and for most other companies,” said Charlie Young, chief human resources officer for Indianapolis-based electronics and home products chain HHGregg Inc. “There’s a lot of ambiguity out there as we approach 2014, and we’re only 11 months away. It’s pretty intimidating.”

HHGregg has 224 stores and 6,600 employees, 90 percent of whom are full time and eligible for the company’s insurance plan.

HHGregg expects to incur additional expenses totaling as much as seven figures, factoring in inflation, to expand coverage to employees under the new law.

The extra expense will be partially offset by tax benefits HHGregg expects to receive by offering the insurance, Young said, making the decision a bit easier. In addition, the employees likely would pay more for lesser benefits if they enrolled in an online health insurance exchange, Young said.

“We’re pretty emphatic about keeping our program as we move forward,” he added.

The retail, restaurant and hospitality sectors are most threatened by the law because large chunks of their work forces clock fewer than 40 hours per week and typically receive no health benefits. And if they do, the plans are usually too skimpy to meet minimum-coverage requirements.

The Papa John’s pizza chain created a national stir when CEO John Schnatter said franchisees of the Louisville-based company might cut employee hours rather than pay for the insurance.

Bowing to public pressure and boycott threats, Schnatter later clarified his remarks and said Papa John’s will continue offering insurance to all corporate employees and workers in company-owned stores like it always has.

But the dustup illustrates an interesting conundrum for employers—pay to cover employees or risk being skewered by the public.

“I don’t know what the right answer is,” local restaurant operator Scott Wise said. “I understand that we want the world to have affordable health care; I just don’t know that you have the ability to do it in a perfect world.”

Wise, who operates nine restaurants in Indiana (mostly Scotty’s Brewhouses) through his company A Pots & Pans Production, is preparing for the impact of the law.

Though most of his 1,500 part-time restaurant employees working less than 30 hours a week won’t be affected, many of the roughly 130 corporate and salaried employees who work more than that will.

Wise is analyzing his options and hopes he can avoid cutting their hours in order to not offer health insurance.

“Full-time staff are some of your best employees,” he said. “Those are some of your most loyal, hardest-working people.”

Benefits consultants have warned that companies that use more part-time labor risk productivity losses from high turnover and lower morale.

Businesses with 50 or fewer full-time employees are exempt from offering benefits. Companies with more workers will be fined $2,000 per employee (excluding the first 30 employees) if they refuse to offer insurance.

Anderson–based Ricker Oil Co., a chain of 49 gas stations operating locally under the BP brand, has about 650 employees, many of them part time.

President Jay Ricker thinks he’ll expand coverage to them and foresees paying the additional cost from profits, because the industry is so competitive that even the smallest price increases are difficult to pass along to customers.

That rings true among many retailers, said Neil Trautwein, employee benefits policy counsel at the Washington, D.C.-based National Retail Federation.

“Health care costs are a huge, huge challenge,” he said. “We don’t have the unfettered ability to raise prices given that the profit margins are so thin.”

Yet, good business owners want to provide for their employees, Ricker maintained. In some cases, however, he doubts it will be possible.

“Some people could go out of business or go to all part time,” he said. “I think it’s going to be a huge issue.”•

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