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North Bay Business Journal

Monday, April 12, 2010, 2:20 am

Employers try to assess health care impact

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    NORTH BAY — Employers large and small are scrambling to assess the impact of the massive health care legislation passed in March.

    According to several human resources experts, apprehension abounds as employees will now be required to have health insurance, either individually bought or through employers.

    Brenda Gilchrist

    Brenda Gilchrist

    “Right now a lot of employers are pretty clueless,” said Brenda Gilchrist, principal and chief executive officer of the HRMatrix, which works with many larger employers.

    Smaller employers with fewer than 50 employees stand to benefit, although confusion is prevalent there, too, said David Israel, a human resources consultant for HRtoGo.

    “We’re all agreed it’s going to be something different,” he said. “Small businesses are saying, ‘We’re going to have to get insurance for everyone,’ but that’s not the full case.”

    What is the case, thus far, is that only a few elements of the new bill, the Patient Protection and Affordable Care Act, that impact smaller employers will go into effect later this year. And the more controversial elements for larger employers won’t take effect until 2014.

    Employers with fewer than 50 workers are exempt from providing coverage, although if they choose to do so, tax credits could be available to offset costs.  Employers with 50 or more employees are not required to provide coverage, but penalties would be assessed on businesses that don’t.

    Jill Williams, president and CEO of HR Biz Partners in San Rafael, said the the bill should not have a major impact on the finances of small employers.

    “Health care reform will have minimal impact on small employers,” she said, pointing to elements of the bill that take effect immediately – a 35 percent tax credit for employers who provide coverage with 10 or fewer employees earning an average of less than $25,000, and a smaller tax credit for employers with 25 or fewer employees earning an average of $50,000. Companies with 50 or more employees are not eligible for tax credits.

    Beginning in 2014, smaller businesses will seemingly benefit again, with a 50 percent tax credit for employers with 10 or fewer workers earning an average of less than $25,000, and no penalties for employers with fewer than 50 employees.

    Despite potential tax breaks, Mr. Israel said smaller employers still face “a great deal of uncertainty.”

    Larger employers, Ms. Gilchrist said, are not happy with what lays ahead, and some of the fines and requirements imposed on them will decrease their competitive advantage while raising the cost of premiums significantly.

    “It’s leveling competition and not in the best sense,” she said. Large employers that already provide insurance for employees will no longer be able to use benefits packages to their advantage in retaining or attracting top talent, she said.

    In particular, companies that provide high-cost health plans for employees will be subject to an excise “Cadillac tax” equal to 40 percent of the value of a plan that surpasses the threshold amount. This will go into effect in 2018.

    Starting in 2014, a $750 penalty per each full-time employee for companies with 50 or more employees will be assessed on those that don’t provide health insurance. Additional fines for employers not covering 60 percent of overall employee health costs will also be imposed.

    Ms. Gilchrist said these provisions could lead some larger employers to re-classify some employees as part-time as a means to reduce operating costs. Part-time employees will not be required to be covered, although they will be counted as partial employees in determining if an employer has 50 employees.

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