Small businesses fret over details of health law

[March 31, 2010]  BOSTON (AP) -- Small-business owner Joe Ascioti says Massachusetts' 2006 health care law has left him facing $15,000 in fines since it took effect. Now, he's worried the nation's new health care overhaul could bring similar woes to employers nationwide.

"The state has mandated something that is one size fits all, which is what this national bill is looking like. And guess who gets to pay for it? The employer," said Ascioti.

As business owners across the country weigh the new law, they're looking to Massachusetts for harbingers of things to come.

Massachusetts' law, which mandates near-universal coverage and requires that businesses with 11 or more workers offer insurance, provided the blueprint for the health law signed by President Barack Obama. Massachusetts employers who don't comply face annual fines of $295 per worker.

While there's been plenty of grumbling among business owners that the state law has squeezed them financially during a tough recession, there's little evidence the law is forcing employers to close or sending them fleeing for the border. Other businesses have welcomed the law and business leaders helped guarantee its passage.

Drawing parallels between the state and national laws is tricky. While both share many of the same tenets -- requiring businesses to shoulder more of the burden of health coverage -- there are major differences.

The national law doesn't require businesses offer insurance but hits employers with 50 or more workers with an annual $2,000-per-employee fee if the company doesn't insure them and the government ends up subsidizing their workers' coverage.

The national law also grants tax credits for businesses with 25 or fewer workers with average annual wages below $50,000, which Democrats say that will benefit 3.6 million business nationwide. And beginning in 2014, businesses with up to 100 employees will be able to pool their employees in state-created insurance exchanges to increase their negotiating clout with insurance companies -- a move supporters say could aid 29 million businesses.

For critics, one of the most troubling aspects of the laws is the fines. Massachusetts has already fined more than 1,000 companies over $18 million for failing to offer medical insurance to their workers.

Ascioti, who owns Reliable Temps Inc., in Agawam, Mass., and hires about 1,000 workers each year, ran afoul of the state mandate that he insure 25 percent of his workers.

"They took a cookie-cutter approach to an issue that wasn't general enough for a cookie cutter," he said.

Such penalties make Doug Newman, owner of Newman Concrete Services in Richmond, Maine, nervous. In the past 18 months, as the economy battered the construction industry, Newman's work force shrunk from 125 employees to just 25.

He is worried that once the economy turns and he begins to hire back workers, he'll face a critical decision when he nears the 50-worker mark and is no longer exempt from penalties. Newman now pays 60 percent of his employees' individual premiums and 40 percent of their family premiums.

"The 51st employee could mean $100,000 in costs. I've been calling it the concrete ceiling," he said. "No employer is going to hire No. 51 if it brings all these mandates down on you, because they're pretty onerous."

Don Day is also worried. Day owns eight small businesses in McKinney, Texas, including two restaurants, a boutique hotel and several retail shops.

Although he employs 125 workers, he offers health care for just a few key employees. Just an extra $200 a month per employee for health care could set him back hundreds of thousands of dollars a year -- a cost he can't afford.

"It's not just me, it's every small business across this land," he said. "A lot of small businesses are going to go out of business."

Some business owners have welcomed the new law.

Rand's Do It Best Hardware store on Main Street in Plymouth, N.H., has been in owner Steve Rand's family for more than a century. About a decade ago the company switched from providing a full health care plan to having employees share in the cost of rising premiums.

Since then, those costs have spiraled out of control and Rand hopes the new law lets him pool his workers in state-run exchanges to increase his purchasing power.

"This legislation is really a positive step in the right direction, allowing us to get back in the business of making our company able to offer a health plan," Rand said.

Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation -- which supported the state law -- said the requirement for near-universal coverage has been a much bigger issue for local businesses than the fines for not offering insurance.

That provision, known as the individual mandate, is costing local businesses between $500 million and $750 million extra annually, he said.

"There is no doubt that with the individual mandate there will be more employers picking up the tab," he said.

Other employers said the Massachusetts law has helped make their businesses stronger.

Vicki Maderia, human resources director for Needham Electric Supply in Canton, Mass., said the company employs 150 and already offered insurance to all full-time staff. The law inspired them to expand that insurance to the handful of part-time workers.

"It was a plus on the company's morale side and it's a plus for us for recruiting," she said. "Here's one more reason to work for us."

Dieufort Fleurissaint, a self-employed personal financial analyst in Boston, said that before the Massachusetts law, he paid $1,200 a month to insure his wife, two children and himself. Now that his family qualifies for subsidized health coverage, his premiums have dropped to $700.

"It's been a good experience," Fleurissaint said. "With the bad economy, I wouldn't have any health insurance."

[Associated Press; By STEVE LeBLANC]

Associated Press writers Kathy McCormack in Concord, N.H., Clarke Canfield in Portland, Maine, and Rich Matthews in Dallas contributed to this report.

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