This is the second of three parts on how Obamacare will affect LBM dealers. Part one covered what the Supreme Court's backing of Obamacare will mean for dealers.
Expect your operations and budgets to be altered as various parts of the Patient Protection and Affordable Care Act—better known by its shorthand name, Obamacare—come into effect. Here are some key dates and issues to keep in mind.
W-2 Forms:Starting in 2013, employers must state the value of their insurance coverage on their employees’ W-2 forms, the Society for Human Resource Management points out. Employers must also cap the dollar limits on their plans’ flexible spending arrangements at $2,500, and increase what they withhold for Medicare from the paychecks of employees with incomes of $200,000 or more.
New Taxes:Ryan Young, senior director of federal government affairs for the Independent Insurance Agents & Brokers of America (known as “The Big I”), adds that next year, the Act calls for a 0.9% federal tax increase on high-income earners and a 3.8% tax increase on investment income, each earmarked to defray the cost of expanding healthcare through this legislation.
Hits on Corporate Income:Lars Froiland, agent and owner of Builders Insurance Group in the Twin Cities area, recommends to his pro dealer clients that they prepare alternate, more modest income projections that take the law into account.
2014 Changes:Employers should be aware, too, that when the Act goes into full effect in 2014, it limits employees’ deductibles and out-of-pocket expenses, and limits the waiting period for an employer to add a new worker to its healthcare plan to 90 days.
Exchanges:Without question, one of the biggest decisions dealers will make in the next 15 months is whether to continue offering health insurance to employees or to move them into exchanges managed by the states. As of mid-July, 15 states had set up Exchanges.
The Act mandates that all businesses with 200 or more employees automatically enroll their workers into a company-sponsored health insurance plan, though employees can opt out and go into an exchange. On the other hand, companies with fewer than 25 employees will be eligible for a tax credit of 35% in 2013 and 50% in 2014 and beyond if they insure their workers and pay for at least half of their premiums. (Froiland notes sardonically that most dealers this size in his market have already dropped their insurance coverage, and they aren’t likely to introduce the benefit now.)
Companies with 50 or more employees are required to offer insurance, move employees into exchanges or pay a penalty of $2,000 per employee per year. The first 30 employees are exempted from that penalty.
Cadillac Plans:Employer-sponsored insurance could become less attractive by 2018, when the Act imposes an excise tax on so-called “Cadillac” plans that are valued at more than $10,200 per individual and $27,500 per family.
Educating Workers:On Jan. 1, 2014, Burman Clark, president of Roanoke, Va.-based broker Muneris Benefits, says his job “will change overnight.” Instead of selling insurance to a company, he will have to educate every employee so that each will “become his own risk manager.” What he fears is that an LBM worker making $30,000 a year will simply select the cheapest of an exchange’s four mandated options without exploring whether it’s the right coverage for himself or his family.
Limit Your Payroll?One of the unintended consequences of the Act could be that it presents a disincentive for smaller companies to employ more than 49 full-time workers in the future. Indeed, three-quarters of businesses polled recently by the U.S. Chamber of Commerce thought the Act makes it harder for them to hire people.
While it remains to be seen whether companies let health care costs impede their growth, the Act will undoubtedly alter the relationship between dealers and workers, perhaps for the better if companies improve the communications with associates and convert them “from being beneficiaries to participants,” says Vogt.
Wellness Programs:Since last year, the Act has been offering five-year grants to small businesses to set up wellness programs, and it allows employers to offer incentives up to 30% of premiums to employees who participate and meet certain health-related standards. The award limit can be increased to 50% at the discretion of the employer in 2014.
For example, this summer, Capps Home Building Center in Virginia was developing a wellness program that includes having a nurse come to its office to screen participating employees. The goal, says general manager Bruce Shelter, is to “stair-step premiums” based on employee behaviors, such as quitting smoking, eating healthier, and exercising more.
A wellness program could also become a platform for getting employees better educated in general about what’s driving health care costs, and how their actions can accelerate or slow that momentum.
Part three covers resources to help you decide what to do.