Fudpucker’s Tim Edwards says the hospitality industry is going to face a lot of challenges when the provisions in the Affordable Care Act go into effect in 2014.
“We will be hit the hardest because we have a very large number of employees, and we typically haven’t offered them insurance,” he told The Log Wednesday. “We’re going to have to change our business models.”
Healthcare reform was the topic of discussion during Tuesday’s Destin Area Chamber of Commerce Leaders in Business Lunch at the Destin United Methodist Church. Kelley Chamblin, a certified public accountant with Warren Averett O’Sullivan Creel was the featured speaker.
She told the group of about 100 that local businesses must begin planning for the impacts of what many call Obamacare, as well as start to determine the number of full time employees they will have going into 2014.
“2013 is a critical year,” Chamblin said. “There is a lot going on.”
As part of the new program, employers would use what’s being called a “look back” period, basically a measurement tool, of up to 12 months to determine if an employee is considered full time, according to the United States Department of Labor website. With the 12-month look-back period, only workers that are still working full time after the 12 months would count when potential penalties are determined under the healthcare reform. The law is based on full-time employees, which is defined as someone that works 30 hours a week or more.
Employers may face penalties if they don’t offer full-time employees health insurance in 2014 or if the insurance doesn’t meet specific qualifications, such as being “affordable.”
The employer and individual mandate provisions of the Affordable Care Act, or Obama Care, go into effect Jan. 1, 2014. This means that businesses will be required by law to offer their employee’s health care coverage, as well as individuals bearing the same burden.
Companies with 50 or more employees are deemed “large companies” and can either provide their employees with coverage or pay a penalty for not providing insurance.
Chamblin said the fine a company pays is estimated to be about $2,000 per employee. As an example, say a company has 53 full-time employees, they can subtract 30 of those employees to start, since you don’t pay the penalty on your first 30 employees, they would have to pay the penalty on 23 employees, or $46,000.
“If you don’t have the coverage, you’ll have to make the decision on whether or not it makes sense to obtain the coverage or to pay the fine,” Chamblin said.
Between his different restaurants, Edwards told The Log that he employees about 150 full-time/core staffers, but that number easily jumps up to 500 during the summer season.
Thankfully for Edwards and others in the hospitality and retail professions, they have the ability to use seasonal employees, which don’t count toward figuring in potential penalties.
Under the law, a seasonal employee is someone that works less than four months, or 120 days a year for an employer.
“We’re going to become more seasonal and part-time by nature,” he said. “It’s going to be a conscious model.”
“We can’t afford to give everyone insurance, it would put us out of business,” he added.
Edwards went on to say that he fully expects to see restaurant and retail employees working multiple jobs to make ends meet, since they more than likely wouldn’t be getting more than 30 hours from one employer. He said that could pose a whole other range of problems, such as scheduling conflicts between jobs.
“It’s a pain in the butt,” he said with a chuckle.
And while he said the idea behind the healthcare reform is “noble,” it’s just not cost-effective for some small businesses that happen to employee quite a few people.
“It’s possibly cheaper to pay the penalty than it will be to pay the cost of the insurance,” he said. “We’ve already begun to do our modeling to see what the financial impact on our business is going to be. We’re looking to see where the money is going to come from.”
As the president and CEO of the Destin Area Chamber of Commerce, Shane Moody has his finger constantly on the pulse of the local business community. He told The Log that his concern about the healthcare reform was the added costs to small business and the “threats” to unemployment.
He said that not all companies with just over 50 employees would pay the fine or provide coverage; they’ll find other options.
“They’ll investigate how to make the same amount of product or provide the same services with less than 50 employees,” he noted. “They’ll be looking at ways to cut expenses, and sometimes that means layoffs.”
Moody also added that businesses would take a hit because most of the costs associated with the reform isn’t tax deductible.
While he is still unsure of the full effects of the Affordable Care Act, Edwards told The Log that all he and his partners and other local business owners can do is make the best of the situation — especially since it could be worse.
“If we can survive an oil spill, we can survive anything,” Edwards said. “Even this healthcare law.”