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Employers brace for law's implementation

Imperial Valley Press Business, January 27, 2013

 By Julio Morales

Two books sitting on Jeff Alford's desk offer a glimpse into his current business dilemma. As the chief operating officer of Alford Distributing, he has been trying to determine the potential impact the Patient Protection and Affordable Care Act will have on the family business.

In addition to his reading "ObamaCare Survival Guide" and "Health Care Reform Simplified," Alford has also had numerous discussions with knowledgeable people about the legal obligations he has as an employer under the new health care law.

"There are not a lot of answers to the questions we have as business owners that have to plan for the future," Alford said. "I'm having a real tough time planning for the next couple of years."

Although the company currently subsidizes the full cost of its employees' health insurance, Alford nonetheless expects he may have to implement some changes as a result of the law. Just what those changes may be isn't presently clear.

What is clear is that the rising cost of premiums and the government's proposed solution have him concerned. Both restrict his ability to manage operating costs and retain a certain amount of flexibility.

"We have to have every option on the table to stay profitable," Alford said. "We have to make sure our doors stay open day in and day out."

The law mandates that employers with 50 or more employees must provide affordable medical insurance starting in 2014. A company will have to pay a $2,000 penalty per worker per year if it doesn't offer such coverage. Alford said the total number of employees "hovers" around 50.

Following the passage of the law there was concern that employers with 50 or more employees would reduce the number of full time employees to become exempt from the law.

Yet moving workers from full-time to part-time generates costs as it increases both the total number of employees and the rate of turnover, said Ken Jacobs, chairman of the University of California, Berkeley Center for Labor Research and Education.

"We're not expecting to see many employers reduce full-time employees to part time," Jacobs said.

In California, the law is expected to add approximately 2 million to the ranks of the insured, Jacobs said.

Where employers are most likely to reduce hours are for employees not offered job-based coverage who work slightly more than 30 hours a week, he said. Doing so would exempt them from paying penalties stemming from not uninsuring employees.

There are no expected staffing and scheduling changes planned at the Imperial Do it centers, where 88 percent of its 75 employees are full-time workers and receive health benefits.

However, there is a fear that premium rates will climb "dramatically" as a result of the new law, said chief financial officer and co-owner Michael Kearney.

"If and when the premium rates escalate, we will be left with little choice but to raise deductibles and co-pays," Kearney said.

There is also a fear that state and federal taxes will increase in order to pay for the mandate.

"Although I personally believe all citizens should be covered by affordable health care," Kearney stated in an email, "it appears the cost to individuals and employers will be formidable when the act is implemented."

It is estimated that nearly 95 percent of employers will be exempt from the law, said Nadia Bermudez, an attorney and partner at the San Diego office of GCR LLP.

On Wednesday, Bermudez hosted a seminar at the El Centro Chamber of Commerce that touched on new employment laws taking effect in 2013. The ACA took up about a third of her presentation, she said.

Calling it a complicated piece of legislation, she suggested employers consult insurance brokers, accountants and employment lawyers in the coming months to better understand their obligations under the new law.

Under the law an employer-offered plan must cover 60 percent of the premium's cost. Also, the employee's share of the premium cost must not exceed 9.5 percent of their income.

A level playing field could result from the legislation. Whatever market advantage a company with uninsured employees may have had over competitors that did offer insurance and incurred higher operating costs may disappear, Bermudez said.

Staff Writer, Copy Editor Julio Morales can be reached at 760-337-3415 or at

Original Article


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