(THE TENNESSEAN) Employers are just beginning to learn the financial ironies of the federal health law.
Small nonprofits that pay no taxes can get tax credits. Some businesses that currently provide generous insurance may stop. And organizations could fork over more money covering part-time workers than full-time workers.
While the Affordable Care Act will provide access to insurance for millions more Americans, it is not a law of equality for employers. The impact differs according to how an employer's workforce is structured and the generosity of its health benefits. The law encourages employers to provide coverage through penalties and incentives, but employers say they don't understand the rules - many of which are still being written.
Richards and Richards, a small business that covers 100 percent of employee insurance premiums, may have to stop providing coverage altogether.
"The law is penalizing me," said Steve Richards, president of the company, which is in the business of safekeeping records.
His premiums are going up, he said, because insurers are passing along the cost of having to cover people with pre-existing conditions. The company has 55 employees - just over a key threshold in the law.
Any employer with more than 50 workers will have to provide coverage beginning in 2015 or pay penalties. Richards said he may drop coverage and pay those penalties if premiums keep rising.
Another Nashville employer, the Brown Center for Autism, is small enough to avoid the penalties and qualify for incentives. The incentives - tax credits that are basically rebates on insurance premium costs - are limited to employers with 25 or fewer workers who make below a set income level.
The school's executive director, Jill Liske, went to a workshop at the Center for Nonprofit Management and learned her organization can get as much as a 35 percent rebate on its costs next year. Her nonprofit qualifies for tax credits even though it doesn't pay income taxes.
To qualify, coverage for the school's 11 employees has to be bought on SHOP Marketplace, the federal exchange for employers.
Businesses that qualify can get as much as 50 percent back in tax credits if they buy coverage on the exchange. Besides the 25-worker limit, there also is a cap of $50,000 on average employee wages to qualify for this credit.
"We have always provided health benefits for our staff, even though it was very difficult for us to do so," Liske said. "We provide services for kids with autism, so we have to be competitive to recruit the very, very best staff. We have always done it, and it's not been easy. It has required a lot of fundraising on our side to be able to support our staff."
Another nonprofit wasn't so lucky. Progress Inc., which helps senior citizens and people with intellectual disabilities lead more independent lives, got hit on three fronts. It has 280 employees - far too many to qualify for any tax credit. It will have to bear the added expense of providing coverage for employees who work as few as 30 hours a week or pay a penalty. And it will have to offer a more generous plan or pay an additional penalty.
Sally Mills, director of fiscal services for Progress Inc., said the one-year delay of the employer mandate gives some breathing room. But at this point, the leadership of the nonprofit has no idea what it will do in 2015.
Mills has been crunching numbers, several sets of numbers. It's been an exercise in futility so far.
Consider this: It would cost Progress Inc. about $500 more to insure a part-time worker than to insure a full-time worker. Employees are not supposed to pay more than 9.5 percent of their income on an employer-sponsored plan. Part-time workers hit the 9.5 percent barrier sooner than full-time employees, because the premium is the same for everybody. So the nonprofit would have to make up a bigger difference for employees working 30-hour weeks.
Mills considered reconfiguring workweeks to accommodate more 40-hour shifts.
"That doesn't meet the needs of our employees or our clients," she said. "We are providing in-home services to seniors. Those are in two-hour segments, four-hour segments or maybe six-hour segments. So you have 50 different employees being plugged in all over a three-county area in different people's homes. It's not like they are going to walk in a door and work 40 hours at the same place, clock in and clock out every day."
She tried to compare the cost of continuing to provide coverage versus just paying the penalties, but there was no way to tell. Mills has no idea what health insurance premiums will cost in 2015 or 2016.
Restaurant chains and retailers that also employ multiple part-timers face the same quandary.
If Progress dropped coverage, its employees could buy insurance on the Health Insurance Marketplace, the federal exchange for individuals. Most of the Progress employees probably would qualify for subsidies toward their premiums.
Dropping coverage would pose an ethical dilemma for a nonprofit that includes promoting health in its mission statement. But Progress Inc. won't be alone in that regard, said Brian Haile, senior vice president for health policy at Jackson Hewitt Tax Service.
Many nonprofits, churches and small governments might do themselves and their employees a financial favor by choosing to pay the penalty, he said.
"The answer is not going to be the same for every organization," Haile said. "What I'm saying is let's take a look at it, step back and not make a knee-jerk decision based on what we think is the right thing. One of the things about the Affordable Care Act is it changes the tax consequences for all these decisions."
Few leaders of nonprofits are aware they can qualify for tax credits to help them provide coverage just as some small business can, said Beth Uselton, an adviser with Baptist Healing Trust whose job entails informing people about coverage opportunities under the law.
"As the former director of a nonprofit, I knew about it only because of my experience within health policy," Uselton said. "I actually had to train my CPA how to fill out the forms. One of the things that I'm finding is professionals who have been helping small businesses may not be aware of all the tax credits."
There are multiple tax consequences for businesses that choose to pay the penalty rather than provide coverage. Besides the penalty, they also will miss out on deductions for providing coverage, Haile said.
"Most people don't realize the Affordable Care Act is really a tax bill," Haile said. "It makes April 15 the most important day in health care."
Richards is considering renewing the health plan for his business earlier than he normally does because his insurance consultant advised him that premium hikes probably will be higher next year than the 5 percent increase he was quoted for this year.
He worries that rate hikes will force him to offer his employees less or no health benefits in the future.
"During the time Barack Obama was running for office, he said multiple times, 'If you like your coverage, you can keep it. You don't have to change,' " Richards said. "That is not true. Here is why.
"You know who is going to choose whether somebody can keep their plan or not? That's me. My employees can't walk up to me and say, 'We're going to keep our plan.' No. I'm the one who makes that choice. I'm the one that's paying the bill."
And an employer's priority, Richards said, is to keep the business running.
The law has less impact on large employers, such as publicly traded companies that are typically self-insured with benefit packages that fall within the law's guidelines. Large employers will have to pay some special fees - one of $63 per covered life to help offset the cost of covering people with pre-existing conditions and another $1 fee to fund research to improve quality and lower costs in the health care system.
Large employer benefits packages will change regardless of the federal law, said Steve Wojcik, vice president of public policy for the National Business Group on Health.
"From the large employer perspective, we know that we tinker with our benefit design every year, so it's always been a moving target," Wojcik said. "There are some changes that the Affordable Care Act has accelerated or required that make it less likely to be the same type plan you had in prior years. But, in general, there has never been 'If you like your plan, you can keep it.' The only time that's true is when you have a union plan where it has been negotiated and set for four years or so."