Some parts of the Affordable Care Act simply don't work for small employers, a New Jersey business owner testified today at a House Ways and Means Committee hearing.
Rep. Dave Camp, R-Mich., the new chairman of the committee, scheduled the Affordable Care Act hearing to consider reports that the act – the federal legislative package that includes the Patient Protection and Affordable Care Act (PPACA) – has caused problems for employers.
Joe Olivo, the chief executive officer of Perfect Printing Inc., Moorestown, N.J., told l
awmakers that he already is having trouble with keeping his current plan.
Perfect Printing has been paying 100% of the cost of high-deductible health plan combined with a health savings account (HSA) program for employees and 56% of the cost of family coverage, even though New Jersey is a state with guaranteed-access, community-rating rules that push up premiums, Olivo said, according to a written version of his remarks posted on the Ways and Means website.
"During the debate leading up to the passage of the [health care] legislation, I heard numerous times that my employees would be able to keep the same plan they currently have," Olivo said. "Unfortunately, within 30 days of the law's passage, I received a letter from our insurance carrier notifying us that our plan would no longer be available at the end of the current term. The reason for this is that the preventative care portion of the plan did not meet the requirements of the new law. The promise that my employees would be able to keep their existing health insurance law has proven to not be true."
The Affordable Care Act includes a tax credit provision that is supposed to help small businesses pay for health coverage, but Olivo said his company has turned out not to be eligible for the credit, even though it has only 45 employees.
"The problem with the tax credit is that it depends on the government's definition of small," and on the compensation paid to employees, Olivo said.
An 18-person business that pays an average of just $38,000 per employee would also be ineligible for the credit, Olivo said.
In 2014, the Affordable Care Act is set to impose penalties on employers with 51 or more employees that fail to provide health coverage.
"Besides being ridiculously complex, it is my understanding that, at the 50 employees or greater mark, I could possibly be penalized even if I do offer insurance to my employees and
one or more of them decide to take a government-subsidized plan," Olivo said.
Once Perfect Printing hits the 51-employee mark, paying the penalty may be cheaper than paying for health coverage, anyway, Olivo said.
"Ironically," he said, "the part of the law that mandates that I must now provide insurance is actually providing the perverse incentive for me not to provide any insurance at all."
Another witness, Scott Womack, president of Womack Restaurants Inc., Terre Haute, Ind., said he has estimated that complying with the health care law could cost his midsize restaurant company about $7,000 per full-time employee, or about 50% more than the company's earnings per employee.
"This law will cost my company more money than we make," Womack said. "And our company is very profitable by industry standards."
Womack, who testified on behalf of the U.S. Chamber of Commerce, Washington, said his company is re-thinking plans that could have led to the creation of 260 full-time restaurant jobs.
Douglas Holtz-Eakin, president of the American Action Forum, Washington, said a small business that is just under the insurance responsibility small business cut-off could end up owing about $42,000 in penalty payments once it goes over the cut-off.
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