August 18, 2019

You’re the Boss Blog: A Bakery Is Relieved to Have the Employer Mandate Delayed

Rachel Shein: Courtesy of Baked in the Sun Rachel Shein: “I think most of my young and healthy workers won’t buy any insurance.”

Case Study

What would you do with this business?

With Congress pushing back an important start date for the Affordable Care Act, giving companies with 50 or more full-time employees an extra year before they are required to offer health insurance to their workers, we decided to check in with Rachel Shein and her wholesale bakery, Baked in the Sun.

In March, Ms. Shein and her bakery, based near San Diego, were featured in a case study that looked at what she would have to do to comply with the new health care law. With insurance companies still developing their offerings for businesses like hers, Ms Shein was delighted to learn that the employer mandate was being delayed. “I was thrilled when I heard we had the extra time to watch and wait,” she said.

At the time the case study was written, Ms. Shein had been quite concerned about the potential effects of the law’s implementation. “We saw it as a significant cost to our business, one we hadn’t built into our business model,” she said. Her participation in the case study led to appearances on several TV news programs, including on Fox Business and CNBC.

Initially, Ms. Shein estimated that she would have to pay $108,000 a year to include the 90 employees who are not currently covered by her company’s health insurance. Her insurance broker now believes that when the final rates are published for next year, the cost will be higher than that.

Ms. Shein, though, will have to pay for only those employees who sign up for the plan she offers, and so far, the plans she has seen have not seemed terribly attractive. One sample plan, she said, included a $4,500 deductible, which Ms. Shein said “is too high for low-wage workers, so my employees may be better off going to the state-run market for individuals, which seems to have more options and better prices.”

Insurance company offerings for businesses like hers are expected to evolve, Ms. Shein said, and she hopes better plans and choices become available, as they have on the individual exchange. Right now, Ms. Shein doesn’t know the final costs or how many of her employees will sign up, so she has not been able to  estimate her expenses with any confidence. “It’s still very messy,” she said.

The delay is an opportunity for both companies and employees, Ms. Shein said, because it gives business owners more time to shop around and workers can take the year to see what is available on the exchange before they decide if they will take company-offered insurance.

Ms. Shein is also interested to see if the managers who are covered by her company’s insurance plan find a better deal on the state-run market. For the rest of her employees, she said, “the individual penalty for not carrying insurance is still low, so unless some better options come out, I think most of my young and healthy workers won’t buy any insurance — either through me or the exchange.”

For now, she plans to focus on running her baking company. “The recession has made us more efficient,” she said. “We’ve automated more and focused on the most profitable parts of the business. I can’t control the insurance rates, but I can make a great espresso mocha scone.”

Article source: http://boss.blogs.nytimes.com/2013/07/16/a-bakery-is-relieved-to-have-the-employer-mandate-delayed/?partner=rss&emc=rss

Today’s Economist: Taxing Employers and Employees

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Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

The delay of the Affordable Care Act’s employer mandate is a favorable development for the labor market, but the employer mandate is only the tip of the iceberg in terms of the labor-market distortions that the law has scheduled to come on line next year.

Today’s Economist

Perspectives from expert contributors.

The Affordable Care Act’s employer mandate will eventually levy a penalty on large employers that do not offer affordable health insurance to their full-time employees. The penalty is based on the number of full-time employees and adds about $3,000 to the annual cost of employing each person.

Employers have been complaining about the penalty, saying it will reduce the number of people they hire and cause them to reduce employee hours. Even economists and commentators supporting the law acknowledge that per-employee penalties reduce hiring by raising the cost of employment.

Economists have traditionally recognized that it hardly matters whether a tax is levied on employers or on employees, especially in the long run. In the employee-tax case, the employee pays the tax directly. In the employer-tax case, the employee pays the tax indirectly through reduced pay, because employer penalties reduce the willingness of employers to compete for people (Jonathan Gruber of the Massachusetts Institute of Technology has provided some good evidence in support of this widely accepted economic proposition).

Among other things, employment, employer costs and employee take-home pay would be essentially the same if the government levied a $3,000 fine on workers for having a full-time job with a large employer that does not offer health benefits, rather than levying the fine on employers on the basis of their full-time personnel, as the Affordable Care Act does.

But the political optics of the two policies are dramatically different. Large businesses can supposedly afford $3,000 per employee, while many employees could not afford another $3,000 bite out of their paychecks. Like it or not, economics’ equivalence results tells us employees will have to afford what amounts to a tax on them beginning in 2015, pursuant to the Treasury Department’s decision to begin collecting the employer penalty in that year.

For the purposes of understanding the state of the labor market, it doesn’t really matter whether individuals would be paying a tax for having a full-time job or receiving a subsidy for not having a full-time job. Either policy would reduce the gap between the income of full-time employees and everybody else. The ultimate result will be less full-time employment, in an amount commensurate with the size of the tax or subsidy.

The Affordable Care Act offers subsidies for people without work or in part-time positions that far exceed $3,000 per employee per year, which makes the employer mandate only a small piece of the law’s employment effects.

The law’s other new work-disincentive provisions, still on schedule for next year, include (i) a sliding income scale that sets premiums for people who buy health insurance on the new marketplaces, (ii) a plan for premium assistance that essentially resurrects the Recovery Act’s subsidy for what are known as Cobra benefits, allowing employees who have left a job to continue to participate, for a limited time, in their former employer’s health plan, in a more comprehensive form and (iii) hardship relief from the individual mandate.

As an example of these provisions, I explained last week how, even without the employer penalties, the premium assistance plan sharply penalizes full-time employment in favor of part-time employment. In combination, the provisions going into effect next year are two or three times larger than the employer mandate by itself, depending on the type of worker and the industry of employment.

Proponents of the Affordable Care Act, including a number of economists, have yet to acknowledge that so many provisions of the act have, from a labor economics perspective, so much in common with the employer mandate. But labor-market distortions are a common feature of several significant parts of the act and are an important part of what has happened in our labor market.

Whatever labor market benefits accrue from delaying the employer mandate could be had many times over by delaying the entire Affordable Care Act.

Article source: http://economix.blogs.nytimes.com/2013/07/10/taxing-employers-and-employees/?partner=rss&emc=rss

Greece Shutting Down State Broadcaster ERT

The government cut the signal of the Hellenic Broadcasting Corporation, known as ERT, just after 11 p.m., about an hour earlier than it had said it would. Earlier in the day, a government spokesman, Simos Kedikoglou, described ERT as a “modern-day scandal” and “a unique case of lack of transparency and waste,” and said it would reopen soon as a “modern state organization” with a fraction of its 2,900 employees.

ERT has not been implicated in corruption scandals any more than any other state organization, and Mr. Kedikoglou’s strong language was broadly seen as the government’s attempt to show creditors that it was boldly and decisively moving to cut waste in the public sector.

Following the broadcast of the spokesman’s remarks on Net, one of ERT’s television channels, the station’s anchors and commentators engaged in a furious live discussion lamenting their fate.

Net’s midday news anchor, Antonis Alafogiorgos, lashed out at the government for accusing the state broadcaster of corruption. “This hypocrisy has to stop,” he said before playing a video from last month showing Mr. Kedikoglou insisting that the state would protect ERT from cutbacks. “None of us want the government to fall,” Mr. Alafogiorgos said, “but these methods are unacceptable.” Echoing other journalists in the live debate, the anchor said his concern was not for his job but for ERT to remain operational. “Mr. Kedikoglou can take my compensation and do what he wants with it,” he said.

Reacting to the news, unions representing the workers crowded outside the broadcaster’s headquarters, north of Athens, and told reporters that they would stage sit-ins to protest the closing of ERT’s five state television channels — three broadcast, one satellite and one cable — and 29 radio stations. (ERT has 2,650 full-time employees and about 250 people on short-term contracts.)

Standing with the protesters, a spokesman for the main leftist opposition party, Syriza, accused the government of “extreme despotism” in closing ERT.

Earlier in the day, the government submitted an emergency bill to Greece’s Parliament — a type of decree that does not require lawmakers’ approval — enabling the merging and abolition of state companies and paving the way for ERT’s closure. The move prompted an angry response by the junior partners in the coalition government — the Socialist Party, known as Pasok, and the more moderate Democratic Left — which accused the dominant conservatives of failing to consult them, an increasingly common complaint.

“The public broadcaster cannot close,” Pasok said in a statement. “A three-party government cannot make decisions without the participation of all party leaders.”

The surprise announcement came a day after representatives of Greece’s troika of foreign lenders — the European Commission, the European Central Bank and the International Monetary Fund — returned to Athens for fresh talks on the progress of the country’s economic reform program. A focus of the talks is a Greek pledge to lay off 4,000 civil servants this year, including 2,000 over the summer. Speculation has been rife in recent weeks that the bloated state broadcaster could be a target for the first round of layoffs demanded by the troika.

This article has been revised to reflect the following correction:

Correction: June 11, 2013

An earlier version of this article, as well as the summary and caption, misstated the broadcaster’s name. It is the Hellenic Broadcasting Corporation, known as ERT, not Net. (Net is the name of one of its television channels.)

Article source: http://www.nytimes.com/2013/06/12/world/europe/greece-state-broadcaster-net.html?partner=rss&emc=rss

French Lawmakers Loosen Labor Rules

The criticism, which was both pointed and indirect, seemed to increase pressure on Mr. Hollande to reorganize his cabinet soon, though it has been in power only a year. Mr. Fabius, a former finance minister himself, referred to divisions within the vast ministry, known as Bercy for its location.

“I ran Bercy in the past, and it’s true it needs a boss,” Mr. Fabius told RTL radio. “At the moment you have several bosses. Whatever the quality of the men and women and their level of agreement, I think that stronger coordination would be more useful.”

Asked if he expected changes soon, Mr. Fabius said that if there were changes to the cabinet, “this question will be dealt with.”

His comments on Tuesday took some of the glow off Mr. Hollande’s legislative success.

The upper house of Parliament easily passed a version of the labor bill already passed by the lower one. It is the culmination of months of painstaking negotiations among the government, employers and trade unions that ended in January. The law also signifies a success in Mr. Hollande’s strategy of avoiding strikes through dialogue and compromise among what he calls social partners.

The law makes it easier for companies to lay off workers or to reduce pay and working hours in economic downturns. But it also increases benefits for workers on short-term contracts, which have been popular as a way for companies to avoid hiring full-time employees, and which represent up to 80 percent of all new job contracts in France.

“This is one of those moments in which a great step forward has been made,” said the labor minister, Michel Sapin, who led the negotiations and is close to Mr. Hollande. The main opposition center-right Union for a Popular Movement abstained in the vote, and the Communists voted against the legislation.

The law’s passage prompted some rare praise for the government from the business world. Laurence Parisot, president of the Medef employers’ association, hailed it in a statement as “an event in the economic and social history of our country.”

The “flexicurity” law gives companies more freedom to hire and fire, as well as the right to demand that workers take pay cuts and work shorter hours in a crisis in exchange for job security. About 3.5 million mostly lower-wage workers will gain additional employer-paid health benefits, and businesses will have tax incentives to hire under long-term contracts. Measures also encourage worker mobility.

While two of France’s more militant labor unions opposed the accord, the more mainstream ones signed on. There is wide agreement that the country has to bring down its relatively high labor costs if it is to compete with lower-wage destinations overseas and even with Germany, which underwent its own painful labor-market restructuring over the last decade and currently has a jobless rate of just 5.4 percent.

It is the kind of structural overhaul that European Union leaders are urging to increase employment and growth in France, which is being given two more years to get its budget deficit down to the European Union-mandated 3 percent of the gross domestic product. But even the government acknowledges that more must be done, including further changes to pensions.

France is in the midst of an unemployment crisis, with nearly 11 percent of the work force unemployed in a period of near recession. Among people under 24, the problem is even worse, with more than 26 percent jobless.

Already under pressure from the European Union to address France’s high public-sector spending, Mr. Hollande has seen his approval rating sink to historic lows in opinion polls. He is scheduled to hold a news conference on Thursday.

But on Tuesday, no government official would respond to Mr. Fabius’s comments. The government spokeswoman, Najat Vallaud-Belkacem, was described by her office as “too busy to comment.” Requests for comment from Mr. Hollande’s office were not returned.

Mr. Moscovici, the finance minister, is considered a moderate and pragmatist on the center-right of the Socialist Party. He has struggled with his junior ministers. Jérôme Cahuzac, the budget minister, resigned in disgrace after lying repeatedly about an undeclared foreign bank account, prompting much criticism of Mr. Moscovici. Arnaud Montebourg, the junior minister for industrial renewal, comes from the left of the party and ran for president himself on a platform of “deglobalization.”

Mr. Hollande’s efforts to pacify all wings of the Socialist Party have thus created constant tensions within Bercy, with Mr. Montebourg calling for protectionist policies, while Mr. Moscovici is trying to convince the world that France is open to investment and competition. This month Mr. Montebourg blocked Yahoo from buying a 75 percent stake in the French video Web site Dailymotion, owned by French Telecom, in which the state has a minority stake.

Mr. Moscovici criticized the move, as he criticized Mr. Montebourg’s angry and public dispute with an American businessman over French working habits at a threatened tire factory.

Mr. Fabius, who in 1984, at age 37, became the youngest prime minister in modern French history, was also finance minister from 2000 to 2002.

Article source: http://www.nytimes.com/2013/05/15/world/europe/french-lawmakers-loosen-labor-rules.html?partner=rss&emc=rss

Case Study: Bakery Owner Talks About Coping With Health Insurance Changes

Rachel Shein, center, is trying to figure out how to comply with the new health insurance law.Sandy Huffaker for The New York Times Rachel Shein, center, is trying to figure out how to comply with the new health insurance law.

Case Study

What would you do with this business?

Last week, we published a case study about Baked in the Sun, a wholesale bakery and distributor that is trying to decide how best to comply with the Affordable Care Act. Starting in January, the new law requires businesses with 50 or more full-time employees to offer health insurance or pay a penalty. Owned by Rachel Shein and Steve Pilarski, husband and wife, the company employs nearly 100 workers to bake and deliver freshly made pastries to coffee shops, hospitals and hotels in Southern California.

Baked in the Sun has offered health insurance to its employees in the past but many are young and healthy and have preferred to keep more money in their paycheck, rather than contribute to a health plan. Soon, though, almost all workers will have to carry health insurance — through their employer, a government exchange or other source — or pay a penalty. And, as the case study discussed, Ms. Shein and Mr. Pilaski are trying to decide whether they will offer health insurance, pay a penalty or outsource enough work that they can reduce their head count below 50 and be exempt from the law.

The article elicited lots of comments and strong opinions, as well as reports in other media outlets, including CNBC, which included Ms. Shein in a panel discussion about her company’s situation. Some readers argued that Baked in the Sun has a moral obligation to offer coverage. Others argued for a single-payer system that would allow owners to stop worrying about health insurance and focus on running their businesses.

Andrew Greenblatt, a senior vice president at Benestream, which helps low wage employees apply for government benefits, pointed out that under the Affordable Care Act, Medicaid has been expanded to cover families earning up to 138 percent of the poverty level, which means that workers who make minimum wage, especially single parents, may qualify.

And Alan Cohen, chief strategy officer for Liazon, a private insurance exchange for companies, suggested in a comment that many employees will be better off if the bakery chooses not to offer insurance and instead pays the government penalty. That’s because the employees would be likely to qualify for a subsidy at a government exchange that would allow them to insure their whole family — but only if their employer does not offer health insurance.

Of course, because neither the minimum level of coverage, nor the costs to all the insurance options have been finalized, lots of uncertainty remains. We contacted Ms. Shein for a follow-up conversation that has been condensed and edited.

A number of readers suspect that you are underestimating how much it would actually cost to insure your employees. Have you taken another look?

The insurance plans are still under development. My broker recently found one that was less than what I had found, but I’m not sure anyone knows what the final rules and prices will be.

Have you thought any further about how many of your employees will actually sign up for insurance if you offer it?

In the short run, when the individual penalty is low, there might not be much participation. We plan to have a meeting with our employees to see what kind of insurance they might want and which of them might be covered elsewhere.

Did this discussion have any impact on your thinking about whether you will pay the penalty or offer insurance?

The employees will all have access to health insurance whether we provide it, or we pay the penalty and they purchase it using a subsidy on the government exchange. We need to look at all the costs and tax implications and do whichever is least expensive for the business.

Are there any reader questions you want to answer?

Some readers claimed it was a moral imperative to provide insurance — but all employees will have insurance under the law.

Some readers thought your profit margin was too low and questioned how well your business was doing. What was your reaction?

Like many entrepreneurs we have great years where we can take vacations and put money into our kids’ college funds. Some years are leaner.

Do you think your customers would pay a few more cents for your baked goods — especially if it allows you to offer your employees health insurance?

Our products are unbranded and sold in hundreds of outlets so it would be hard to educate consumers about our employment practices. And the popularity of Wal-Mart shows that most consumers just want the best price.

You suggested in the article that you might have to raise your prices 4 percent to cover the cost of providing health insurance. But 4 percent of $8 million — your annual revenue — is $320,000. That’s a lot more than you estimated the cost of insurance. Couldn’t you just raise your prices 2 percent?

Yes, a 2- to 3-percent increase could cover the costs, but it’s a low margin business and pennies matter so we like to build in some buffer.

Would you favor a single-payer system?

I am in favor of a system that doesn’t penalize a business for being successful and able to hire more than 50 people and doesn’t deter us from wanting to grow. I am in favor of a system where everyone pays in, and everyone is covered. If that is a single-payer system, I’m for that.

Article source: http://boss.blogs.nytimes.com/2013/03/26/bakery-owner-talks-about-coping-with-health-insurance-changes/?partner=rss&emc=rss

Case Study: A Bakery With 95 Employees Confronts the New Health Care Law

THE CHALLENGE The company is one of thousands of small businesses that employ more than 50 full-time employees and thus will be required to offer health insurance to their workers — or pay into a government fund — beginning Jan. 1. Rachel Shein and Steve Pilarski, the married owners of the bakery, which employs 95 people, estimate this could cost their business up to $108,000, and they are weighing their options as the date approaches. “Our revenues are about $8 million, but the food business is a low-margin industry so cutting $108,000 out of our profits, which are just over $200,000, is a big deal,” said Ms. Shein, who is the chief executive. They are evaluating different ways to comply with the new law and finance the expense.

THE BACKGROUND Ms. Shein and Mr. Pilarski bought their first bakery, a maker of scones, 16 years ago. Their business grew along with the popularity of coffee shops, and they expanded their product line to include other pastries.

During the recession, the coffee shop business contracted so they found new customers among hotels and hospitals, but the cost of servicing different types of businesses and developing new products to meet their needs eroded profits. At the same time, gasoline and ingredient prices went up and vendors tightened payment terms. Still, the couple persevered by providing an array of freshly baked goods and offering product variety and consolidated delivery, simplifying things for their customers.

With the recession behind them, Ms. Shein and Mr. Pilarski are trying to rebuild their profitability. Baked in the Sun produces nearly 200,000 items a day — almost 200 different products, including brownies, coffee cakes, muffins, and cookies — in an 18,500-square-foot baking facility in San Marcos, Calif. The goods are delivered to coffee shops, schools, hotels and hospitals in the San Diego area.

THE OPTIONS Ms. Shein is contemplating several options to comply with the Affordable Care Act’s business mandate.

Option One is to provide the insurance. According to the law, Ms. Shein will have to offer health insurance or, most likely, pay a penalty, and she estimates the insurance would cost up to $108,000 a year for 90 employees (managers have insurance already).

This is just an estimate, she said, because the insurance companies have not yet created and set a price on plans that meet the law’s requirement for minimum care, but she estimates a cost of $200 per employee a month, of which the bakery would pay half and the employee would pay half. Employees can choose not to participate in the plan if they are covered elsewhere or for other reasons, so it is unlikely they would all sign up.

Option Two is to not offer health insurance and let employees find coverage elsewhere, perhaps on one of the new government exchanges. Under this option, the company would probably have to pay the mandated “employer shared responsibility payment” to the government.

The cost to the business would be $2,000 per employee a year, but the law exempts the first 30 employees, so the total would be $130,000 per year for a 95-person company. One benefit of this option is that the company would not have to take on the burden or expense of managing the insurance plan, which Ms. Shein estimates would take $10,000 of staff time.

One way to cover the costs associated with the new law would be to raise the price of each item sold about 4 percent and pass the costs along to buyers. “It’s ironic that our success meant we could grow,” Ms. Shein said, “and now we will be competing against smaller companies, with 50 employees or fewer, who will be able to charge less per item because they don’t have the financial burden of health insurance.” Prices are currently similar among local competitors, Ms. Shein said, and she believes the increase in her prices could affect her sales, possibly significantly.

Ms. Shein is considering a third option: outsourcing certain jobs to reduce staff, because businesses with 50 or fewer employees will be exempt from the penalty. “We can outsource the cleaning and make the drivers independent contractors,” she said, “and we can cut the least profitable delivery routes, least profitable accounts or reduce the variety of items we create.”

Article source: http://www.nytimes.com/2013/03/21/business/smallbusiness/a-bakery-with-95-employees-confronts-the-new-health-care-law.html?partner=rss&emc=rss