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Government Watch

Obamacare’s Job Killing Employer Mandate

from – TownHall.com – by Kara Jones

Panola Pepper Corporation was started for all the right reasons. Located in the town of Lake Providence in Louisiana’s East Carroll Parish, the hot sauce company has been providing employment to those who live in one of the nation’s poorest areas. Year after year, East Carroll Parish ranks among the top 10 U.S. counties with the highest poverty rates. Time magazine once named the town of Lake Providence the “poorest place in America.”

Founded in 1983, Panola Pepper began as a wintertime business to give farm workers income during the three-month gap between the planting and harvest seasons. Employees would produce, bottle, and label hot sauce so they would not have to go on government assistance to make it through the winter. Fortunately, the product was so well received that the business became full-time. Thirty-one years later, Panola Pepper employs 35 people and continues to grow.

One major roadblock stands in the way of that growth, however. The employer mandate of the Patient Protection and Affordable Care Act, otherwise known as Obamacare, imposes new regulations that make it difficult for Panola Pepper to continue operating in the way it always has. In fact, Obamacare has put undue burden on small businesses and large corporations alike, impeding growth and increasing costs across the board.

Small Business Staying Small

The employer mandate will require that all American businesses with 50 or more full-time employees (defined as working 30 or more hours per week) provide health insurance or else pay a penalty. Businesses that do not comply will receive a steep fine of $2,000 for each full-time employee beginning with the 51st person. After being delayed twice since 2012, the mandate is expected to go into effect in 2016.

In the case of Panola Pepper Corporation, President and CEO Mike Coullard explains that his small business simply can neither afford to accommodate the mandate (by providing insurance for all employees) nor pay the penalty fines. While operating within a very small profit margin in this impoverished area of the country, Panola Pepper must now consider machinery options to replace employees.

“Now that we’re looking at getting close to that number of 50 employees, we are starting to look at automated machinery instead of people as a viable option to meet our growth needs,” Coullard tells Townhall. “And they’re certainly out there. You can buy faster equipment to eliminate people from virtually every position on our assembly line. It takes about 13 people to run the line and we could spend half a million dollars on better equipment and eliminate about eight of those people. We are not doing this because it’s not part of our culture, but if we are forced to provide health insurance to our employees, then that half a million dollars seems a whole lot easier to spend.”

Another option is to cut employee hours so they are no longer considered full-time. “These are the tough decisions that we face,” Coullard explains. “Our options are limited. Keep doing business the way we always have and be forced to go out of business because we can’t afford to pay anyone, or make some of these tough decisions that the government is putting on small businesses.”

Coullard stresses that the company’s objective is to employ as many people as possible, turning any profit back into the development of new products so they can hire more people. “When limits by government are put on your ability to grow and continue to do things the same way,” he says, “unfortunately, people are affected.”

Big Businesses Facing Higher Costs

Small businesses like Panolo Pepper are more willing to tell the truth about plans to mitigate Obamacare’s high costs than large corporations that fear boycotts and bad press from progressive activists. For example, the media chastised Darden Restaurants, the owner of Olive Garden and Longhorn Steakhouse, in 2012 after announcing plans to limit the number of full-time employees per restaurant. Large companies are still finding ways to deal with Obamacare’s costs; they just aren’t making any public statements about it.

But by exactly how much are costs rising as a direct result of Obamacare? Since the law passed, chief human resource officers are becoming increasingly attuned to the health care aspect of their overall job. Dr. Patrick Wright of the University of South Carolina’s Darla Moore School of Business conducted a survey of top CHROs across the country, focusing on their company’s response to the employer mandate. The results revealed that a whopping 78 percent of respondents reported health insurance cost increases by an average of 7.73 percent. Additionally, 37 percent indicated that labor costs have increased by an average of 5.6 percent. Only 19 percent experienced no net change in costs.

The shift to high-deductible consumer-directed health plans is also becoming more commonplace as a means to reduce costs. Employers hope that by putting more responsibility into the hands of the employee, fewer services will be used. But Wright notes there are downsides, too.

“On the plus side, the move to CDHPs will increasingly introduce market mechanisms into the health care market. On the negative side, however, it will be a difficult transition in terms of a change of mindset for both employees and health care providers. Employees will have to take more responsibility for choosing lower cost providers and providers will have to become significantly more transparent in their prices.”

Wright also found that 73 percent of respondents plan to, or already have, moved employees to consumer-directed plans, and 71 percent have raised or will raise employee contributions toward health insurance. Nearly a quarter said they will more rigorously ensure part-time workers stay beneath the 30-hour limit.

A Logistical Nightmare

It’s no secret that Obamacare is unpopular among CHROs. In a survey by the HR Policy Association, only 10 percent said the law would help their companies more effectively control health care costs. Forty-eight percent predicted costs would increase by 0 to 5 percent. Thirty-seven percent predicted costs would increase by 6 to 10 percent. Five percent predicted costs would increase by more than 10 percent.

Eighty-five percent of respondents reported they find it troubling that the law has increased access to the health care system without making significant improvements in the efficiency and affordability of that system. And shockingly, 68 percent said that if other large employers decide to no longer offer health care coverage, their companies might give serious consideration to doing the same.

Christine Cunneen, CEO of Hire Image LLC, a company that performs background screenings and drug tests, has seen an 86 percent increase in health care premiums over the last seven years. Her employees’ $500 deductible has now quadrupled to $2,000.

“Two people under my plan have had to pay $2,000 out of pocket, whereas in the past, they typically didn’t get to the deductible unless they were getting care out of plan or out of network,” Cunneen explains. “Now, they go for blood work and are charged $150 for a draw fee. There are a lot of underlying costs that no one is really talking about.”

“I think there should be some type of solution, a lot of it is falling on the backs of the individuals who have been covered in the past,” she notes. “It’s quite expensive for us to stay competitive in the job market if you’re keeping good staff.”

As a perk, Cunneen covers 75 percent of health care premiums for her employees and will continue to do so for now.

Similarly, John Overton, owner and CFO of IT company Turn Key Solutions, generously covers 80 percent of his employees’ health benefit package.

“For professional positions, such as the caliber of IT professionals we seek to hire, quality benefits are high on the priority list of potential candidates,” Overton explains. “In the past we could say, ‘In addition to competitive salary, we offer the same great health care benefits as most Fortune 500 companies.’ Now, instead of highlighting premium health care benefits, we highlight that we pay 80 percent of the employee’s basic health care benefit package.”

To compensate for the more basic health insurance plan, Overton has increased the starting pay for new positions by as much as 20 percent.

“It is disappointing not being able to offer my employees premium health care plans that are affordable, but we are trying to make up for it by paying more,” he says. “We’re growing and hiring, but health care options and rates have become more and more of an impediment to growth rather than the improvements that the [Obama] administration promised.”

Government Picking Winners and Losers

The American Health Policy Institute recently calculated the costs of Obamacare over a 10-year period. “We … found that the marginal costs of the ACA for larger corporations are about $5,000 per employee over a 10-year period,” says Dr. Tevi Troy, AHPI’s president, former-deputy secretary of Health and Human Services, and former-senior White House aide in the George W. Bush administration. “That is just ACA-related hikes; that does not include health care inflation or the aging work force.”

“For the average of one of these large corporations (i.e. 10,000-plus employees), we would see costs in the $160 to $200 million dollar range over that 10-year period. Again, this is just marginal ACA costs,” he continues. “Every large company is making changes in their health care system, it’s just the fact. … There are about 170 million people in employer-sponsored care right now and they are all looking at the system saying, ‘What are we going to do differently over the next 10 years?’ We don’t know the extent of all the changes.”

Compared to small businesses, huge corporations have infrastructures that make it easier to absorb and redistribute costs. A large sum of the increases can be made up for by passing it along to employees through higher premiums.

“Large companies have such large employee bases that they’re not concerned about one marginal hiring decision changing the entire scope of how they deal with health care. They’re more interested in the marginal cost per employee than what the overall costs are of hiring,” Troy explains.

“The people who get subsidies will see benefits and the people who don’t will see higher costs, I mean it’s always been the case that there will be winners and losers in this law,” he adds.

Raising the Costs of Job Creation

Randy Bradley, owner of a Burger King franchise through Kadina Corporation, tells Townhall he might have to drop employee retirement plans and cut hours to offset the new health insurance regulations.

“We have to look at a number of solutions because if the cost of insurance per employee is more than my profit, which it will be, that will drive me out of business unless I take other actions. There will be a combination of having to reduce other employment costs. For instance, my employees have a retirement plan available that will probably end because I can’t afford to provide both health care and retirement.”

It’s tricky business in the fast food world when one must raise prices to make up for increased costs.

“There is only a certain amount of elasticity in the market,” he explains. “If I go beyond a certain point in raising prices, customers are going to come less often because they can’t afford to come at the new prices. We have very difficult decisions to make. What costs do we cut, what prices do we raise, how much do we raise them by, and how do we comply with all of this regulation? There are a lot of very difficult decisions involved here.”

Bradley explains: “They have defined large business by the number of employees you have, but the number of employees you have does not give any indication as to whether health insurance is affordable. If you’re making $1,000 per year per employee and the insurance will be $3,000 per employee, it does not matter if you have five employees or 500 employees, the profit per employee dictates whether or not you can afford insurance.

“It is absolutely going to cost more to hire people and that also means we are going to be able to give less in the way of wage increases,” he continues. “Within a business, you have a certain amount of money for each type of expense: utilities, insurance, food costs, paper costs, etc. Those things don’t go away, so I only have a certain percentage of the money I get from my customers to spend on labor costs. If they force me to put more money into health insurance, I’m going to have to reduce the number of labor hours I can spend. It’s a limited pool. If I can only spend, say, 18 percent on my crew members’ hours spent working, I am still only going to be able to spend 18 percent. If the cost is going up per person, I’m going to have to cut hours.”

These are not isolated cases. According to surveys from the Federal Reserve Bank of New York, 17 percent of businesses reported that they are reducing the number of workers they employ and 22 percent said they are reducing wages and salaries of those employees. Twenty-five percent said they are increasing consumer prices to help mitigate costs. Sixty-nine percent of businesses plan to increase employee contributions by means of higher copays, deductibles, and premiums.

This is simply not sustainable. Obamacare was sold to the American people as a budget-neutral law that would even save the average family $2,500. Instead, Obamacare has raised health care costs, forced millions of Americans to buy more health care than they wanted, and killed countless jobs in the process.

If one thing is certain, it is that Obamacare has been effective in redistributing the wealth from those who previously had employer-based insurance to those who did not. With the Congressional Budget Office predicting that 30 million people will still be uncovered by the end of the decade, Americans continue to ask if this was really worth it.

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joe k

I am telling everybody that as soon as obama leaves office we will find out that he still has muslim feelings from his early days. And one way to solve these Dem./Rep mess is to have all veterns unite under one flag and get rid of the two party system. We are the largest voting bloc in this great country.and these Pols have lived the high life too long

ktdid

O’care is an elaborate Ponzi scam! When the young (the new ones at the bottom of the pyramid) realize it’s cheaper to pay the fine than it is to buy into o’care, thee will be no new money coming in to cover those on top (retirees) and the thing will collapse! Just what O wants – the one insurance group! O scares me totally! He acts just like a dictator: he ignores the very Constitution he has sworn to uphold twice in front of millions and millions of people! He has virtually no knowledge of how to lead and has a big mouth that tries over and over to explain things. The moment he said he would do things with or without the approval of Congress, he should have been impeached and removed from office!!! That in itself tells you he has no respect for this country! Could he be… Read more »

Robert A Hirschmann

Don’t you people realize that Obamas whole agenda from the start was to totally destroy this country? That’s what his “fundamental change” is all about. He does not want us to be oil independent! He does not want us to have jobs! He does not want us to succeed in anything! Since he has been in office he has ignored, bypassed and flat out disobeyed our constitution! He added 17 TRILLION dollars to our debt. He crammed Obamacare down our throats He makes laws that are illegal. He uses the power of the presidency to bully, intimidate and prosecute anyone who disagrees with his policies. How long will we let this go on? He was brought up to hate America and all it stands for. I am totally against him. I am an American and proud of it. I guess that makes me a racist. I believe in the tea… Read more »

vincent

I being from the class of 45 served proudly under J.F.K. and sadly under his progressive successor try to talk to my age group who have seen the world change and not for the better but still vote straight D. That is what they have always done and they will not change no matter what. The facts put in front of them and they will not look at them or engage in dialogue about them. They are to old, tired AND too ignorant in some cases to be bothered. They rely on the corrupt propaganda machine run by the gov’t and sports. No such thing as FREE press or FREEDOM OF SPEECH. This country has turned into an UPSCALE SOCIALIST GOVERNMENT before our very eyes. Their are many good young well intended politicians with a strong value system that this country needs but they need our help. Do your homework,know… Read more »

Grumpy

Have seen the effects of Obamacare at Home Depot. Ratio of full time to part time employees is about 5 to 1. All of us part timers are strictly held to under 30 hours. Opportunities for full time are very limited. Starting wages are low and yearly increases are VERY small. On top of that, the price of everything (except wages) is going up. Am hoping all you geniuses who voted for Obama figure it out soon.

Curt S

A third party has always hurt the Republican party and helped the democrats. Not only do we have problems with rino’s like my Senator, John Mc Cain; we have good conservatives cowering in the corner afraid to speak the truth for fear of being crucified by the propaganda, I mean news channels.

There are a few constants in life, one of them is “Those who cannot remember the past are condemned to repeat it. (George Santayana) And in looking back in history a lot of what is going on now is awfully familiar.

Personally, I think the government needs an enema; and the voters should give it to them beginning this year.

Evan

A third party is only a spoiler when they send mixed messages like the lLbertarians. A truly conservative and constitutionalist third party would replace the Republicans in a single 4 year election cycle.

March On

My place of employment has already cut back hours of many of its staff to under 30 hours per day. The rest of us remain with a several thousand dollar deductible. Next year the company is to have 200 dollars added to its premium for each full-time employee. This law is hurting companies and individuals. A friend of mine had an individual medical insurance plan which called for a 2000 dollar deductible for nearly a 900 dollar a month premium. He signed up through Obama Care to have full-coverage for less than $300 per month, with a $100 deductible. so what is a man to do? No wonder OBC looks inviting to so many.

Jon K

So what can we the people do to counter this attack along with the many others on our country and way of life? It is one thing to post on a comment board like this or Yahoo, Facebook, etc., but what can and should be done out in the world of ignorant mind-numbed, media mesmerized sheeple?

Money man

What many of you do not seem to understand is that the purpose of Obamacare and all other regulatory agencies is operated under the president have the purpose and intent of destroying the American economy as we know it and re-distributing the wealth to other nations. In my professional field, the overregulation has become so intense that you cannot even send encrypted documents to people without first getting their signed approval on each and every email. This has caused me to sell my business at age 65 and walk away from my profession. If you go back and read Atlas Shrugged, you will note that the overregulation causes business owners to eventually walk away from their businesses and stop operations. It will not happen this way in America, the business owners will just lay off all of their employees and operate the best they can on their own. If you… Read more »

Marcella Dellaposta

Our goose is cooked! Both parties rig the elections to put fellow Marxists in power. All of the Dumocrat Party is now Marxist and the Rino Republicans are also. With traitors to the Constitution and thus the United States running the country we have nowhere to go but down.

KarenFaye

And, in a timely manner – AFTER the election, more “good news” on OBAMASCARE will come out. People are, in the words of my sainted Mother, SCREWED. We’re on Medicare, and are already learning of triple costs on our medications, (and two NOT COVERED AT ALL) procedures that will NOT be approved of in 2015, and similar deterrents to the health and well being of the EXPENDABLE senior population. Sadly, the Obama Groupies, the Moochers and Grabbers, won’t notice a difference in their health care, because the Taxpayers paid for it anyway….. it’s the working population and over 65’s that will suffer the consequences of this Madman’s plan. I hope Obamacare covers Ebola and the Entrovirus — and being beheaded, at the least. This country is “open season” to the nuts and Jihadists who only want to “rule the world”. Funny thing, Obama says “Islam” is not a threat, ISIS… Read more »

Joe

Every time I post one of your articles in Facebook, I hear from relatives who are pleased to have health insurance when before they had none. Apparently, it makes no difference if the ambulance driver hits a dozen pedestrians on the way to their front door. As long as he gets there, everything is just fine. Gouging seniors is perfectly okay too, as is decimating the home health care industry which puts women out of work. Our Medicare Advantage plan went from $0 to $860 thanks to Obamacare which really hurts seniors on a fixed income. And, what do we see on TV? Another golf outing.

vincent

We have to thank all those for the condition of our country. obama has said he would destroy this country in [his]? own words written by a terrorist ayers who he hardly new. o’care was waiting for him to promote when he was sworn in and like everything else he has done he had no clue. pelosi, the hallow eyed burn out from drug land, “pass it before you can see whats in it”, emphasis on “ignorant” here, statements ever, and to think this loon was no.3 at one time. Scary. Senile sack of puss from the great state of crime, unemployment and foreclosure, has refused every attempt by the congress to do anything for the last 2 years. McConnell is almost as bad as reid, and sadly he will probably be re-elected, “thought kentuckians were smarter” as was reid and obama. Also a special recognition for past efforts in… Read more »

Disruptive Element

If in this day of technology I would think that citizens and small business could unite, communicate and band together to make a louder uprising through the media etc.to Washington using press conferences, etc. being very vocal. That could be done with the help of their governor and legislature. What I notice is a lot of complaining, offering of ideas but no actions. I notice that when the government wants its way we the legal citizen taxpayers are overwhelmed with the use of that technology telling us we are bigots against illegal immigration, we are racists, we are this and that because we don’t want traditional marriage changed when they could have civil unions instead. They produce movies and television shows drowning us in images of what we should accept until we accept it. We the people- has been forgotten by we the people and we have let them steamroll… Read more »

PaulE

“Americans continue to ask if this was really worth it.” Most intelligent Americans have long ago concluded that Obamacare was neither worth it nor was it ever going to achieve that stated goals promised to the American people by the Socialist Democrat Party. For that matter, most of these same people realized, before the law was even passed, that it would never work as described and would merely be a massive job killing, economy killing program of epic proportions. After all, both recent and longer term world history is littered with examples of how such programs have only served to gradually bankrupt nations and end up destroying the very medical care available to the average person. The only problem was there wasn’t enough of these people to stop this travesty from being enacted into law. So now articles like this one will simply remind Americans of the consequences associated with… Read more »

Rik

We can all thank the jackass Socialist Democrats that passed this horrible legislation! If the dumbass Republican Party leadership doesn’t win both houses of Congress this upcoming election, the Tea Party should break away and form a third party. I’m tired of losing elections because Republican leadership keeps puting up milktoast moderate rino candidates.
If we’re going to lose, let’s at least lose with real conservative candidates.

Also, let’s not forget to thank Chief Justice Roberts for his role in allowing Obamacare to rape our healthcare system.