By Melissa Daniels | PA Independent
HARRISBURG — Dennis Costello runs the Hotel Bethlehem in Pennsylvania’s Lehigh Valley, employing 180 workers in the city’s only full-service hotel with restaurants and banquet space.
About half his staff takes advantage of employer-provided insurance.
But because of the federal Affordable Care Act, he says, the hotel will have to determine how to offer the same guest services while facing twice the expense.
“It will certainly require us to take a look at basically everything,” Costello said. “What we charge people, our room rates, the number of associates. We certainly would be very, very careful about filling any vacancies and really running a leaner operation.”
Local competition includes franchise hotels, with smaller staffs, that won’t be subject to provisions of the health-care act.
“To now have to pay for everyone’s health care, that is going to put us at a competitive disadvantage,” he said.
Costello is one of the millions of American business owners responding to the now-constitutional implementation of the Affordable Care Act. As providers of insurance to millions of workers, employers like Costello are combing regulation information to learn how they’re affected.
And as they may learn, constitutional doesn’t necessarily mean consumer-friendly.
Some say the act will do its job by insuring millions, which includes offering businesses new ways of obtaining insurance. But others say the penalties and associated taxes will drive up costs, hampering the hiring power of independent business owners.
One of the most direct effects on employers are health insurance penalties, which kick in at the start of 2014. The fees could go into the six figures for employers who don’t offer health insurance, or the right type of coverage.
President of the Pennsylvania Chamber of Commerce Gene Barr said the penalties are a disincentive to hiring.
It comes down to a numbers game, about whether penalties are cheaper than hiring new employees and offering insurance, he said.
“With the provision of the law affecting employers of 50 and above, if you’ve got 45,46,47 employees, you really have to think twice about whether you want to bring on those extra employees that bring you above the threshold,” he said. “That’s the exact wrong way to go.”
The penalty for businesses with more than 50 employees that don’t offer health care is $2,000 per number of full-time employees, minus 30. The fee will apply to employers as long as one employee received a tax credit to buy insurance through new state-run health insurance exchanges. Those tax credits apply to workers who earn up to 400 percent of the base poverty level, or around $44,000. If wages are high enough that no employees qualify for the tax credit, the employer would not be subject to a penalty.
The penalty will increase each year, tied to growth in insurance premiums.
Another penalty exists for businesses that offer insurance.
If the employer fails to pick up at least 60 percent of the cost, or if the cost to employees is more than 9.5 percent of their family income, the penalty is $3,000 for each employee who becomes individually insured via the health exchange.
Businesses that provide insurance may be hit in other ways.
The health insurance tax included in the Affordable Care Act is a flat tax on insurance companies, which is divvied up by the health insurance companies through a profit-based formula.
Total collections will increase over time, starting at $8 billion in 2014 and $11.3 billion in 2015-16. Overall, the tax is estimated to bring in more than $87 billion in its first decade.
A Congressional Budget Office analysis links to future increases in premium costs, saying the tax “would be largely passed through to consumers in the form of higher premiums for private coverage.”
But others say that impending reforms will provide relief to small businesses offering insurance.
Antoinette Kraus, project director for health-care advocacy nonprofit Pennsylvania Health Access Network, said the small business tax credit will benefit businesses throughout Pennsylvania.
The tax credit applies to businesses with fewer than 25 employees and an average wage up to $50,000. The organization estimates some 130,000 small businesses can benefit from the tax credit.
“Small businesses have always struggled with rising health-care costs, and these tax credits help offset some of that,” she said.
Kraus says the health insurance exchange will allow businesses to have better bargaining power when buying insurance.
“They see a huge rise in premiums and under the Affordable Care Act, small businesses will be able to get coverage through a health insurance marketplace,” Kraus said.
Bret Keisling, a Harrisburg-based lawyer who represents independent business owners, said during an ACA support rally the legislation would help spur job growth by allowing those with pre-existing conditions to get new jobs without fear of losing coverage.
“It’s very important to provide health benefits to employees for a number of reasons,” Keisling said. “It makes you more competitive, it allows you to attract and retain better employees. Every story you’ll hear hear today also has a flip side. Those people that will speak of not being able to change change jobs because they’ll lose their insurance. I can’t hire them.”
But tax credits, flexibility and comparison shopping aren’t enough to woo all small business advocates. Alarmed by the penalties and the health insurance tax, the National Federation of Independent Business, calling the legislation unconstitutional, signed on as a plaintiff in the U.S. Supreme Court case .
Kevin Shivers, executive director of the Pennsylvania chapter of NFIB, said the tax credit will only help a fraction of small businesses offset costs. Those who have under 25 employees may not offer health insurance as it stands, and the credit expires after three years.
“Health insurance gets more expensive, it’s a timed tax credit,” Shivers said. “You’re probably not going to be eligible to collect the full credit, and its going to expire. So, really, where is the value?”
On the whole, the legislation is unpredictable from a business management standpoint, Shivers said.
“If there’s a predictable tax structure, if I as an employer know what my taxes are going to be for the year, if I know that they aren’t going to be any unforeseeable taxes that are going to be enacted, if I know the budget is relatively stable, and there won’t be a need to impose new costs, it’s going to be more effective for me to plan,” he said.