N.H. businesses put decisions on hold amid ACA confusion

Incomplete, inaccurate information could mean businesses have been leaving millions of dollars in tax breaks on the table

Manchester developer and entrepreneur Dick Anagnost had determined he would have to lay off about a third of his 155 employees at one of his companies, a trucking firm, because of Obamacare.

After consulting with lawyers and accountants, he figured he would have to pay a $5,000 penalty for every worker, or more than $750,000, because he doesn’t contribute enough to his current health plan to meet Affordable Care Act standards.

“The company still has to operate in the black. We are not a charity. It’s the most incredible anti-job bill ever,” said Anagnost.

But Anagnost – like, as it turns out, many businesspeople in New Hampshire – seems to have been misinformed.

For instance, in Anagnost’s case, the penalties, which begin in 2015, could be either $2,000 or $3,000 per worker, but not both. And neither choice would involve every employee. So, when told he might actually face a penalty of closer to $250,000 rather than $750,000, Anagnost said he would still lay people off, but not as many.

“I’m not sure,” he said. “You hear something different depending on the time of day and who you’re talking to.”

Anagnost is not alone, both in his anticipated action or his opinion, but he may not be in the majority either.

According to an NHBR online survey of about 125 New Hampshire businesspeople, about a fifth of respondents said they plan to reduce their workforce through layoffs or attrition to avoid what they see as the effects of the health reform law as the key provisions of the law go into effect. But the majority plan on taking no action, at least until they feel that they’ve gained an understanding of the law and its consequences.

That’s good news when it comes to layoffs or cutting employees’ hours, but bad news when it comes to putting off plans for possible expansion.

It also may mean that New Hampshire businesses will be – and have been – leaving millions of dollars in tax breaks on the table.

The NHBR poll indicates:

• Most employers don’t plan to change their policies. Sixty-six percent said they won’t change their hiring practices. Seventy-two percent said they won’t alter employees’ hours, and 59 percent said they won’t change their health benefits.
   
• About 8 percent said they would lay off workers and 12 percent said they would not hire more because of the ACA. But more than half of those respondents had far fewer than 50 employees and are not required to provide benefits to their employees under the law.
   
• While 14 percent said they would reduce workers’ hours because the law requires that businesses offer health insurance to 95 percent of those averaging 30 or more hours of week, the law doesn’t apply to a third of them, because they also are way below the 50-worker threshold.
   
• Only 2.6 percent of respondents said they think they are eligible for a substantial business tax credit – as much as 50 percent of their premiums – and more than half said they didn’t know if they were eligible. Yet half of the respondents have fewer than 25 employees, and 71 percent of them offer health insurance, indicating that a substantial number of these businesses are eligible for the tax credit.
   
• Opinions about the ACA were mixed. Pluralities said it is bad for their business (36 percent) and bad for the economy (45 percent). But 41 percent said they think it is good for society.

Employer requirements

Even though the NHBR survey was a small sample of Granite State businesspeople, business leaders said that the results nevertheless reflect what they’ve been hearing from their members.

“Overall, there is a general uncertainty and desire for education,” said Peter McNamara, president of the New Hampshire Automobile Dealers Association.

“Businesses are very confused and don’t understand what is needed to be in compliance,” said Nancy Kyle, president of the Retail Merchants Association of New Hampshire.

“They are anxious about how it will impact their business and the cost of health care,” said Adrienne Rupp, vice president of communications for the Business and Industry Association of New Hampshire. “Part of it is that there is constantly new information out of Washington. So up to this point, it is wait and see.”

Some of the confusion over the law stems from decisions, or indecisions, in Washington. Firm deadlines seem to melt away just as they are approached. The penalties for larger businesses, for instance, will now go into effect at the start of 2015, instead of next January. And five days before the Oct. 1 startup date for businesses to enroll the Small Business Help Options insurance exchange – known as SHOP – the launch was pushed back until November.

But other aspects of the law probably will go ahead on schedule. Employers must:

• Adopt a new requirement that employees can’t wait more than 90 days to receive workplace coverage.
   
• Give notice disclosing whether their health plan is not “affordable” or “adequate” (which would allow employees to find coverage on the individual insurance exchange).
   
• Determine whether the company’s plan is “grandfathered” back to coverage offered in 2010, or upgraded to new standards required under the ACA. (Keeping the old plan means that you cannot substantially increase employee contributions or cut benefits.)
   
• Get used to a new bill. Insurers will bill for each employee based on their age and family size, as opposed to current composite billing, meaning rates may fluctuate month to month.

To offer or not to offer?

All this means that businesses have to make some “tough decisions” in the coming weeks and months, said Greta Johansson, who heads the New Hampshire office of the U.S. Small Business Administration. The law will affect companies in different ways, she said, “so it becomes a business-by-business decision.”

Some, like Chuck Cressy, owner of the Durham Marketplace, said he’s determined to “beat this stupid law” in any way he can.

Cressy figured out that by ACA rules he has 50.25 full-time equivalent employees, which makes him, just barely, a large employer.

“I’m just a little store in Durham surrounded by the big guys, a neighborhood market,” he said. “Am I really a larger business?”

Cressy did offer health benefits to about 20 full-time employees, those who average 38 hours a week. But he had another eight to 10 part-time workers averaging between 30 and 38 hours, and said he couldn’t afford to offer them coverage. So he cut most of them back to 29 hours. In addition, he said he is considering using a employee leasing company to staff an ice cream business in the front of the store, if it will keep him under 50 employees.

But is leasing employees to avoid providing health coverage legal?

Generally, the ACA will follow most labor laws, which dictate that different businesses under the same ownership are counted as one when it comes to meeting various thresholds.

That’s why Anagnost – whose different business are owned by different partnerships – can treat his various businesses as separate entities, but Harry Wesson can’t.

Wesson owns the Lovell Lake Food Center in Sanbornville and a smaller store in Maine. Together, they add up to 37 employees under ACA rules. He had been planning to open a third grocery store on the Seacoast.

“We had a letter of intent, and we were ready to go, but that would have put us over 50, so we walked away from the deal,” he said.

The reason wasn’t so much to deny coverage to future full-time employees, but to keep coverage for eight full-time workers in New Hampshire.

“I’m trying to protect my key people right now,” he said. “I only have so much money, and if I have to cover part-timers, I don’t see how I could do it.”

Wesson considered just paying workers more and letting them buy insurance on the individual exchange, since the subsidized rates might actually be less than what he currently pays. But the closest hospital, Frisbie Memorial in Rochester, was not included on the provider network offered by Anthem Blue Cross and Blue Shield in New Hampshire, meaning that many employees would have to get new providers in Dover.

“If the employees come to me, I definitely would have that discussion, but only if it’s a better value for them,” said Wesson.

Josh Robinson, president of Concord-based Checkmate Workforce Management Solutions, a payroll services firm with some 500 customers, has heard similar stories. He expects 30 or 40 percent of the firms to make some adjustments because of the law, but he thinks that some companies are overreacting.

“The idea of downsizing your workforce rather than focusing on growing your business is a decision not to grow your business,” said Robinson. “I wouldn’t let that potential barrier stop my company. There are so many obstacles created by regulations – be it OSHA, or DOL, or wage and hours. This is just one more. We are not in a world where regulations are diminishing, so get over it and deal with it.”

Tax credit calculations

For smaller firms, the big change will be in the tax credit, which actually has been in effect since 2010. The credit, which is for firms with 25 employees or fewer, will increase in 2014 from a maximum of 35 to 50 percent of premiums, but only for those who buy a plan on the SHOP exchange.

Already, it seems, many businesses are leaving money on the table. Nationally, some 185,000 firms applied for a credit in 2012, according to the Internal Revenue Service, or about 3.5 percent of the nation’s 5.3 million firms with under 20 employees, according to the U.S. Census Bureau. Those firms, which average about five workers each, received credits totaling $465 million, or slightly less than $3,000 per company.

The IRS didn’t have a state-by-state breakdown, but if you project national figures to the 27,000 firms in New Hampshire with fewer than 20 people, you come up with an estimated thousand filings with credits totaling $2.7 million.

There should have been a lot more.

The tax credit involves calculating the wages of each worker against the premium and health plan offered (though next year, any plan in the exchange will do the trick).

“The calculation is so onerous, and so many are not eligible, the amount of time going though this exercise isn’t usually worth it,” said CPA Steven Feinberg of Appletree Business Services in Londonderry. “It’s a nice idea, but using our tax system to accomplish this is a nightmare.”

But Robinson of Checkmate Workforce Management Solutions in Concord said that it would be worth it for most non-professional firms. They would benefit if they filed amended returns for the previous year, and should especially consider it for next year.

“It doesn’t make sense not to pay a couple of hundred to an accountant or a payroll company to what may be thousands and thousands of dollars back,” he said.

Checkmate itself took advantage of the credit in the past, though that may end next year because Concord Hospital was also left off the Anthem provider network on the exchange.

Nevertheless, “it’s a real benefit for small business,” said Dawn Ashley Lemieux, owner of Venture Print Unlimited, a shop with six full-time equivalents in Plymouth, who is supportive of the ACA. The credit, she said, made the difference between rates going up to rates going down.

Even some small professional firms who won’t qualify for the tax credit hope to take advantage of the new law.

Lee Berard, a principal at Berard Martel Architecture of Bedford, said he dropped insurance for his employees (and dropped about half his employees as well) due to the recession. However, as the economy picked up, “we hope to get back in the game.”

Depending on the rates, he is considering offering group insurance through the SHOP exchange or subsidizing his workers individually. He has contacted one company that would manage employees’ individual plans as if they were a group, enabling him to track results and provide incentives.

While others bemoan what they see as a government takeover of the health care system, Berard said he has been fed up with the “egregious profiteering” of the current workplace-based system.

“The system was so broken, I’m ready for anything – Obamacare, Republican-care, any kind of care.”

Eileen Pannetier, president of Merrimack-based Comprehensive Environmental Inc., an environmental engineering firm, has continued to offer coverage, despite increases of as much as 30 percent a year.

“We are an old-fashioned firm that gives what used to be normal benefits,” she said. While she is hoping for lower group rates through the exchange, she wouldn’t think of sending her employees there as individuals.

“I can’t imagine recruiting good people and saying, ‘You are on your own as far as benefits are concerned,’” she said. “People with good skills want benefits, and they will go where they can get them.”

On the other hand, Ken Yorston, owner of A Cut Above Landscaping in Meredith, has never offered benefits and said he won’t start now, subsidy or no.

“I can’t afford it,” he said.

His three employees will face the choice of going on the exchange or paying the penalties, though he thinks “the government should leave people alone. “

He himself will pay the penalty.

“Yeah, I worry if I get really sick,” he said, “but what are you going to do? You go to the hospital financial department and say, ‘Hey. I’m going to make payments.”