Sean Yolish, vice president of benefits for Merit Resources, speaks during ABI’s healthcare forum on Feb. 14. Photo by Duane Tinkey
Sean Yolish, vice president of benefits for Merit Resources, speaks during ABI’s healthcare forum on Feb. 14. Photo by Duane Tinkey

Less than six years after she launched her staffing agency, Katie Roth’s business employs 75 people. But she’s concerned that additional regulations and costs tied to health-care reform may force her to scale back her company’s growth.

Under the Patient Protection and Affordable Care Act signed into law in March 2010, companies that have more than 50 full-time employees and meet certain other provisions will be required by January 2014 to offer health insurance to all of their employees or face significant penalties.

“It could limit the number of people I have out on assignment,” said Roth, owner of PorticoHR in West Des Moines, who said that may be a better choice than increasing her company’s health-care costs. “For not only me, but for a lot of small businesses, it may cap our growth.”

Roth was among approximately 75 business owners and executives from a variety of Central Iowa companies who voiced their concerns during a health-care reform panel discussion hosted by the Iowa Association of Business and Industry on Feb. 14. The four-member panel of experts, moderated by John Stineman, principal of consulting firm Strategic Elements LLC, included:

• Chris Collins, a certified public accountant with LWBJ Financial LLC;

• Alice Helle, a partner with the BrownWinick law firm who specializes in health-care law;

• Brook Rosenberg, a partner with insurance brokerage firm Ahrold Fay Rosenberg Inc.; and

• Sean Yolish, vice president of benefits for Merit Resources Inc.

No proof

“Depending upon your perspective,” Stineman told attendees, “health-care reform is either the most revered piece of legislation in the last 40 years, or it’s the most reviled, and there doesn’t seem to be much middle ground there. But whether you like it or dislike it, it’s here, and it needs your attention.”

The discussion made clear that many Central Iowa business owners, insurers and employers feel that the federal initiatives intended to “bend the cost curve” of health care are destined to increase, not decrease, costs.

“There’s nothing that anyone has been able to demonstrate that bends the cost curve in this act,” Yolish said. Additionally, many of the same questions that were being asked while the measure was under debate in Congress still remain unresolved today, he observed.

Though it remains to be seen how Congress and the Supreme Court may revise or even repeal some of the act’s provisions, “everything that I’ve seen is nothing but increasing the cost curve, and actually just spreading it out among the business owners,” he said.

Imposing more data reporting and regulatory requirements upon small business owners will certainly drive up costs, Yolish said. With the new law, “there is a significant increase in reporting requirements, which still have no clarity around them,” he said. “Most small businesses don’t have a professional human resources person or benefits administrator working within their office. It’s the small business owner – or their bookkeeper or CFO - who will have to deal with them.”

In several instances, the Internal Revenue Service has postponed or even reversed effective dates of regulations, the panelists noted. One of the key provisions that has been postponed, Helle said, is the non-discrimination requirement that would preclude many businesses from providing better health insurance benefits to its executives or other highly compensated employees than to the rest of their employees.

Though the non-discrimination rule probably won’t go into effect this year, “you really need to watch this because the penalty for having a discriminatory plan is an excise tax of $100 per day per participant,” Helle said. “The IRS was even initially taking the position that that tax applied to every employee you discriminated against, not the number of highly compensated employees.”

Regardless of how the law is interpreted, “if you’re giving health insurance benefits only to your executives, you’re for sure going to have a problem,” she said.

An eye on the ball

A company’s health insurance plan may be “grandfathered” if the business hasn’t made any significant changes to the plan since enactment of the reform law. However, the majority of companies haven’t taken advantage of this exemption, primarily due to the costs that maintaining coverage at the same level would entail, Helle said.

Rosenberg said the on-again, off-again nature of the reform implementation has been extremely frustrating to insurers and business owners alike.

“We get (requirements) and then they take it back and then we have to go back to our clients and say, ‘Oh, we’re sorry. What we told you last month isn’t true.’ And they look at us like we’re stupid,” he said, drawing a laugh from the audience.

Similarly, Yolish said, many employers began complying with the non-discrimination provisions on Nov. 1, the original effective date. “The government again said, ‘We aren’t really sure what we want to do about that,’” Yolish said. “Well, most employers can’t say, ‘We increased our contributions to all employees, but now we’re going to take it back.’ So this whole health reform scenario needs to be watched; you’ve got to keep an eye on that ball, because it’s ever-changing.”

Roth said she attended the seminar because “there hasn’t been a lot of clear-cut communcation about the act, particularly regarding small businesses. The thing that I appreciated is hearing that there is still a lot of confusion, and that there continue to be changes.”

As a staffing specialist, Roth said she is particularly concerned about stricter requirements regarding waiting periods that employers can impose before offering health coverage.

“A lot of my people end up getting hired by the company they worked for,” she said. “It could be a huge administrative nightmare for me if I have to offer them health insurance on a shorter-term basis.” Previously, she could determine the waiting period, which could be up to 90 days, but at the seminar she was told that it had been shortened to no more than 60 days.

In the tax arena, a potential benefit for small businesses is the 35 percent tax credit incentive, which is generally available to companies with fewer than 25 full-time employees that offer health insurance plans, Collins said. However, the rules are complex, she added, so small business owners should consult with their tax advisers to determine if they meet the criteria.

This year, “there were supposed to be increased reporting requirements on the W-2 that were postponed,” Collins said. “You may or may not see that next year.”

For individuals, in 2011 the tax penalty for non-medical withdrawals from a health savings account increases to 20 percent of the amount withdrawn, and purchases of over-the-counter medications can no longer be included as eligible expenses on flexible spending accounts, Collins noted. The IRS is also proposing to cap flexible spending accounts at $2,500 of expenses per year, as well as increasing the threshold for itemizing medical expenses to 10 percent of adjusted gross income, up from the current 7.5 percent.

Changing models

Rosenberg said he has observed a shift in how larger companies are dealing with insurers as a result of reform.

“The health insurance companies are changing their models to meet this thinking. And the big employers are now pushing back, saying, we’re not going to accept the cost shifting from Medicare and Medicaid,” he said. “So a lot of the big employers are going directly to the hospitals, doctors and clinics and negotiating directly and taking that shift away from their exposure. That could be good in the long run, because it’s all outcome-driven at that point. If you keep your employers healthier, they’re going to be more productive, you’re going to have less workers’ comp claims, less medical claims.”

Terry Slinde, a leadership coach whose consulting business, RockSolid, works with management teams and executives, said afterwards he didn’t fully realize the complexity – not to mention the uncertainty – of the health-reform provisions until he attended the forum.

“If anything, there’s a lot of frustration, and the uncertainty of not knowing what we’re going to end up with,” he said. “Businesses are afraid they’re going to come up on the short end of this.”

Though change must be driven by a company’s leaders, employees have a significant amount of control over whether health-care reform will work, Slinde said. “If they take responsibility for their health and wellness, I think the situation can improve,” he said. “My experience with my clients is that companies become frustrated because employees don’t use the programs.”

Rosenberg said businesses will have to be willing to make broad changes in their corporate cultures to truly effect change.

“The American model (of health care) is basically a sick-driven model; it’s not an outcome-driven model,” he said. “Preventive care is not the first thing the health-care system looks at. So the corporate culture is one of the things that we preach. You’ve got to change your corporate culture to match the identity of what you want to do as a company.”