Good news is coming for about 600 employees of Park West Cos. Inc., a landscape, construction and maintenance company in Rancho Santa Margarita. Starting in 2015, they're getting company-sponsored health insurance.
The bad news for Park West: The move will cost it about $2.5 million a year. So the company is considering cost-saving moves such as eliminating coverage for spouses and raising co-payments and deductibles in the company-offered insurance, which would lower premiums. Even that will only save about $200,000, though.
"So I'm starting at about $2.3 million in increased costs, and I'm going to have no choice but to pass those costs along to my customers," said Chief Operating Officer Jim Tracy. "I'm going to have to increase my contract costs in some cases by as much as 10 percent to offset the cost of insurance."
Cutting employees' hours to evade the requirements of the Affordable Care Act, which some call Obamacare, is "not a viable option," Tracy says. "The people in this business are the single most important resource I've got."
In recent weeks, high-profile corporations have reset their employee health care offerings as Obamacare approaches critical mass:
-- Disneyland said it recently offered full-time status to 1,000 part-time employees who had worked more than 1,500 hours in the past year -- the number that would make them eligible for medical benefits under the health reform law.
-- Trader Joe's is cutting health benefits for part-timers and sending them, along with $500, to the Obamacare exchanges.
-- UPS is eliminating insurance for employees' spouses who have other options.
-- Walgreen, the giant pharmacy retailer, will give full-time workers a fixed sum to purchase coverage from a smorgasbord of options on a private insurance exchange.
That's just the tip of the iceberg. Companies of all sizes and in all industries, in Orange County and across the nation, are working away beneath the radar to figure out what the federal health reform law means for their profits and their workers. Many local companies -- seeing orders rise as the economy improves -- say they won't cut workers or hours, but instead plan to reduce health benefits in existing coverage.
Employer calculations depend on many factors: the size and demographics of their workforce, the strength of their profit margins, their corporate culture, the degree of competition for business and talent within their industry, and the type of health insurance they offer already -- if any.
Not all the deliberations are to satisfy statutory requirements of Obamacare. The law is helping to shape longer-term thinking about how employers deliver health coverage, in some cases solidifying ideas that have been in the works for years as companies grappled with rising health care costs.
But, of course, compliance with the new rules -- and what that will cost -- is foremost on the minds of many corporate managers. That is especially true at companies with at least 50 employees who work more than 30 hours a week, which is the threshold for determining whether employers will be liable for a penalty if they don't provide insurance.
And merely providing insurance will not be enough to avoid penalties. The insurance offered must meet federal thresholds for affordability and minimum benefit levels.
True, this "employer mandate" has been delayed by a year, until Jan. 1, 2015. But a year is not a long time with something as tangled as Obamacare, and companies of all stripes are busy taking stock, preparing for some hard decisions.
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