In a hearing on the budget and health care last week, Sen. Max Baucus (D., Mont.), chairman of the Senate Finance Committee, voiced a sentiment that should resonate with a broad swath of the American population. He told Secretary of Health and Human Services Kathleen Sebelius that Americans, and small businesses in particular, have “no idea what to do” when it comes to health reform.
“I just see a huge train wreck coming down,” Baucus said. “You and I have discussed this many times, and I don’t see any results yet.”
For both consumers and business owners, in the months leading up to the implementation of several key provisions of the Affordable Care Act, confusion and misinformation reign.
Some big-name companies have gained attention over the past year by cutting workers’ hours as a response to Obamacare. Starting in 2014, under the legislation, employers with 50 or more full-time employees could face penalties if they don’t make affordable coverage available to full-time workers, which it defines as those working at least 30 hours a week.
But it remains unclear whether the costs associated with the health-care overhaul are truly to blame and whether shifting more workers to part-time status is a viable answer.
Cutting worker hours
Most recently, Regal Cinemas, which operates more than 530 theaters in 38 states, said it’s cutting back on hours for non-salaried workers as a response to the Affordable Care Act. “Regal had to increase our health care budget to cover those newly deemed eligible based on the law's definition of a full-time employee,” a company memo obtained by FoxNews.com said. Regal would not comment for this article.
Following the news, Regal saw a consumer backlash; some took to Twitter and Facebook to express their displeasure. Similar criticism followed Darden Restaurants (DRI), which owns Olive Garden and Red Lobster, when it announced last December a plan to move full-time workers to part-time status for the same reason. Darden backed off “after its tests aimed at limiting health care costs resulted in a publicity backlash that took a bite out of sales,” the AP reported.
A handful of other restaurant chains have taken similar action in the past year. In January the vice president of operations for a Wendy's franchise in Omaha told a local news station that costs associated with the ACA are forcing the business to reduce hours for around 300 non-management employees to 28 a week.
But a spokesman for Wendy’s (WEN) said: “We have not made changes to the way we staff and operate our Company restaurants due to the health care law. Given where we are in this process, it’s premature for us to discuss our current thinking or potential approaches.” (A Wall Street Journal article last month reported some restaurant chain operators indicated the law may not be as costly as they initially thought.)
Lack of clarity
A survey conducted in February by eHealth of 259 business owners with fewer than 50 workers found that almost a third (32%) of respondents incorrectly believe they’ll be required to provide group insurance in 2014, and 24% think they’ll be taxed if they don’t.
“There’s clearly a significant amount of misinformation floating around affecting a number of employers and making them panic,” says Linda Blumberg, a senior fellow of the Urban Institute’s Health Policy Center.
“So many small-business owners are confused about this, but there’s an appetite to learn about it,” says Kevin Kuhlman, manager of legislative affairs at the National Federation of Independent Business. No doubt in part because of this confusion, in February the SBA launched a site to help educate business owners on the new law.
Consumers are baffled, too. A Kaiser Family Foundation survey from March found that, three years after the law’s passage, a majority of Americans (57%) say they don’t have enough information about the ACA to understand how it will affect them.
Part time vs. full time
A key point of contention for many businesses (such as restaurants, which employ a shift-style workforce) is the 30-hour per week definition of a full-time employee. Last week a small-business owner and NFIB member testified before the House Committee on Small Business, asking the committee to amend the definition of full-time employee to 37.5 hours a week, saying the law will result in lost work and income.
“It’s so much on everybody’s minds now,” says Scott DeFife, vice president of government affairs for the National Restaurant Association, a trade group. “2013 is the year you have to think about these things to figure out your workforce demographics, who’s part time, who’s full time” to prepare for the 2014 guidelines."
Local governments have also been exploring a workforce shift as a way to save on health care costs. Virginia’s Gov. Bob McDonnell in February ordered state agencies to cut back part-time employee hours to no more than 29 a week because of the law. The state’s community colleges are seeing the impact. Glenn DuBois, chancellor of the Virginia community college system, limited adjunct instructors to seven credit hours in the summer and no more than 10 each in the fall and spring semesters so as not to exceed the 30-hours-a-week threshold.
The concern about how the ACA will impact business owners’ bottom line is certainly widespread. But the actual responses in anticipation of the law’s requirements so far are more episodic.
“Some smaller franchise operators spoke out about what they plan to do," DeFife says. "But that’s not necessarily the direction they got from corporate. I think those are a handful or more of anecdotes that aren’t reflective of what’s going on in the broader picture of the [restaurant] industry.”