News Column

Are NJ Employers Ready for Big Changes in Health Insurance?

Jan. 14, 2013

Michael L. Diamond

health care

Jim Scarponi, the owner and general manager of Harpoon Willy's restaurant in Wall, can't envision dropping the health insurance he offers his 50 employees, even after reading the efforts some in his industry are considering to get around the requirements of the new health care law.

But who, these days, can be sure?

"I just laughed when we were doing our renewal," Scarponi said Friday. "Our health broker didn't have a lot of answers."

With the Affordable Care Act -- sometimes called Obamacare -- kicking into full gear a year from now, central New Jersey employers are sifting through the new law, and the new regulations coming out daily, to see where they fit in health care's new landscape.

They are counting employees and hours worked. They are figuring out if the plans they offer are considered affordable. They are analyzing the cost of insurance, weighing it against the cost of not providing insurance, and factoring in what they need to do to retain their best employees.

In the end, experts think employers -- at least those with more than 50 workers -- will decide to provide the benefit. But that decision won't come without a struggle.

"My suspicion is employers will throw up their hands and simply say, 'I don't have the time, ability or inclination to learn everything in the act,' " said James Anelli, an attorney at LeClairRyan in Newark. " 'That's why I have a broker or consultant or attorney. They're going to tell me what I should do. And I'm going to do it.' "

The legislative fight is over. The legal fight is over. The presidential campaign is over. And the Affordable Care Act -- a law that attempts to cover the 48.6 million Americans without health insurance and slow down the growing cost of health care, which has risen so fast that it makes up 18 percent of the nation's economy -- has survived.

Among its most contentious provisions, it mandates most Americans purchase health insurance through private insurers, their employers, government programs such as Medicaid, or new state-by-state health exchanges beginning in 2014.

Standing to benefit most are business owners such as Cindy Curto, owner of The Dawg Joint in Asbury Park, who hasn't had health insurance since she opened her pet store and grooming business five years ago.

Curto has worked hard to keep her business afloat, wading through the recession, Asbury Park's economic travails and superstorm Sandy, and winning over customers with high-quality customer service and competitive prices.

She has gotten close to at least breaking even -- if she doesn't consider the cost of health insurance premiums, which, when she checked recently, would be another $500 a month.

The law, experts said, should offer enough tax breaks and credits to help Curto buy affordable coverage for herself from the new insurance exchange.

"My dog has insurance and I don't," Curto, 47, said as her Lab mix Remi sat nearby. "I continue to check each month to see if I can afford it."

Larger employers, however, have tough decisions to make. The law requires employers with more than 50 full-time-equivalent employees -- defined as those who work at least 30 hours a week -- to provide either health insurance for their full-time employees or pay a steep penalty if those employees instead purchase their coverage and receive a tax credit at the health exchange.

The coverage must be comprehensive enough that it pays for at least 60 percent of consumers' average health care expenses. And it must be affordable enough that employees don't pay more than 9.5 percent of their families' income on premiums, Anelli said.

It didn't take long for some employers to begin to poke holes in the act. Some major restaurant chains in particular hinted they might cut employees' hours to 29 hours a week, making them part-time and, thus, not necessarily eligible to participate in their companies' health insurance plans.

For one chain, criticism of the law might have backfired. Orlando, Fla.-based Darden Restaurants Inc., whose restaurants include Olive Garden and Red Lobster, said last month its sales were lower than expected in part because of the negative publicity it received from the suggestion it might tinker with employee hours.

Experts said hospitality and retailers in particular face some of the biggest challenges, because they are big employers with a mix of full- and part-time employees and haven't traditionally offered health benefits.

"Restaurants operate on such a slim profit margin, and the success rate of restaurants is scary at best," said Marilou Halvorsen, president of the New Jersey Restaurant Association, a trade group. "On top of that you're impacting them with a huge financial regulation. It's not that restaurants don't want to (provide the benefit). It's just a huge undertaking. If they knew what it means, it might dispel some of the fears."

Staying Healthy

Employers both large and small may resort to the one sure-fire way to keep the cost of health insurance in check: Improve the chances that their employees don't get sick.

The law allows employers to offer bigger financial incentives to their employees for participating in a wellness program that would track their smoking habits, body-mass index, blood pressure, cholesterol and glucose level, said Jim O'Connor, managing director and executive vice president of CBIZ EAO Benefits, a consulting firm in Manasquan.

"I'd tell you there are many employers that will not make the decision based on that (financial) aspect," O'Connor said. "The dynamic of being able to attract and retain the best employees is a very critical business decision for employers to evaluate. If they feel like in their industry or their geographic area they are challenged in attracting new talent or retaining the talent they have, I believe ... they're not going to drop the coverage."

Scarponi at Harpoon Willy's sounded like he was leaning that way, particularly after last week when his 2-year-old son landed in the hospital for two days with pneumonia. Even with insurance, he expects to pay $1,000 out of his own pocket.

Yet questions about the law remain, including some important ones. For workers not covered by their employers, what will New Jersey's exchange offer?

"I'm still trying to get all the facts," Scarponi said.

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Source: (c) 2013 the Asbury Park Press (Neptune, N.J.)