June 11, 2023

You’re the Boss Blog: A Business Owner Expects the Worst From Health Insurance Overhaul

The Agenda

How small-business issues are shaping politics and policy.

Kurt Summers: It's about fear.Courtesy of Austin Generator Services Kurt Summers: It’s about fear.

The Supreme Court decision upholding most of the Affordable Care Act came as a blow to Kurt Summers, a small-business owner in Austin, Tex. Soon after the decision was announced, he warned his fellow citizens, through the auspices of The Washington Post, that unless “we elect officials to both Congress and the White House who understand the importance of small business and who will return some sanity to Washington” — and repeal the health law — he will most likely have to postpone his considerable ambitions for his company.

In the short-term, today’s ruling will force me to pause and rethink my immediate hiring, acquisition and expansion plans. In order to plan ahead, I need to know what future costs and regulations I will be facing. With the law intact, I expect the cost of doing business to increase and new regulations to be delivered by a federal government that doesn’t appreciate the daily challenges of running a business.

Like many small companies, our business is largely dependent on the prosperity of larger business; if the economy begins to fail, and if our business customers suffer as a result of this law, the ripple effect will force us to hunker down and perhaps even to let people go.

In our first two profiles of business owners struggling with health care decisions, those owners did not have such strong feelings about the Affordable Care Act — they had hoped they would benefit from it, but they didn’t know much about it. Mr. Summers, our third profile, is obviously in a different situation, and we wanted to understand why.

Mr. Summers is a board member for the National Federation of Independent Business, which brought the lawsuit that the Supreme Court decided. He said he originally wrote his article at the behest of the group, which placed it at The Washington Post. Because the N.F.I.B. wanted to distribute its views the moment the Supreme Court spoke, Mr. Summers also prepared reactions to be published in the even of a split verdict or a decision to strike down the whole law.

As it happens, Mr. Summers owns two businesses. Austin Generator Service, a business that his father started in 1978, sells and maintains back-up generators to institutions like hospitals, government offices and high-rise residential buildings. Several years ago, Mr. Summers opened a side business that rents equipment for testing generators and other power equipment. It is called Loadbanks of America, and it has since become his engine of growth. Together the two companies employ 24 people, he said, up from 14 or 15 in 2008. So far this year, he has hired six new people, with plans to hire at least five more next year.

Mr. Summers offers his employees two insurance plans. Most of them subscribe to a major medical policy with a $3,000 deductible. “When you make the deductible, it’s a hundred percent paid up to — I guess there’s no limit on it now under the new health care law,” he said, alluding to a provision, frequently mentioned by Democrats, that eliminates lifetime caps on benefits. (Annual limits on benefits are banned beginning 2014.) There are, however, co-payments for prescription drugs and doctor visits. The insurance is through United Healthcare, and Mr. Summers said he was satisfied with the choice of doctors. This year, Mr. Summers added a similar plan, but with a $4,000 deductible and a health savings account. He does not offer family coverage.

Whatever its limitations, the insurance Mr. Summers provides has gotten more expensive every year. The company currently pays about 90 percent of the premium cost, and “we’ve increased that contribution every year to cover most of the cost increases that we’ve seen over the last three years,” he said. This year the company is paying about $3,360 per employee. Still, that would make this a relatively inexpensive plan, to judge by the most recent Kaiser Family Foundation survey of employer-sponsored health care, which reports that the average high-deductible plan in the South cost $4,862 in 2012.

But at one point Mr. Summers and his father actually dropped health insurance, because “the premiums exceeded our profits.” Five or six years ago, about the time he got into the load bank business, Mr. Summers concluded that he needed to cover himself and his employees, not only to protect the company should he need medical care but also to lure the talent needed to expand.

And he has big plans for the load bank business. His two companies have already outgrown a 5,000-square-foot storage building bought in 2010; in three years, he’d like to build a 20,000-square-foot facility. He would also like to establish branch offices and supply depots in four to six major cities around the country and hire people to staff them. “Assuming the economy doesn’t tank, and we don’t put the brakes on, we do anticipate being in the 50- to 100-employee range in the next three to five years,” he said. The total investment over five years, in land, people, and inventory could range from $5 million to $10 million.

In his commentary, Mr. Summers wrote that he expected “the cost of doing business to increase,” but in conversation he was reluctant to be pinned down on the new costs he’d face. He said his insurance agent had told him that the consumer protections in the law — such as removing those caps on reimbursed medical expenses — were at least partly responsible for his higher insurance premiums. (“You cannot provide free services and not pay for it,” he said.) But he also acknowledged that it was difficult to gauge the law’s direct effects on his business two years before its main provisions would take effect.

Mr. Summers was more comfortable discussing the health care law’s implications for the broader economy than the direct effect on his own business. We talked at length about why he fears his customers could retrench in the wake of the law’s execution — and how his suppliers might pass on their increased costs to him, raising his costs as his revenue is squeezed. But it turns out that in a long conversation, Mr. Summers’s thinking about the law and its effects is a bit more nuanced. He deployed many ifs and coulds. When pressed to explain why he presumed business — that of his customers and his suppliers — would react so negatively to the health care law, he tempered his pessimism.

“I hope I’m not saying that I’m presuming that is going to happen,” he said. “I think it could happen, and by nature of that possibility, I simply have to be cautious.” Mr. Summers also said that he would be closely monitoring the economy and customer demand irrespective of the health care law’s fate, and he would adjust his plans as circumstances warranted.

The Agenda suggested that his customers and suppliers were unlikely to be any better than he at predicting how the law might affect their companies. He conceded this, and a few minutes later offered an explanation for what seems to be a pervasive sense of gloom in the small-business economy.

“When you talk about an economy that’s sluggish,” he said, “you’re really talking about people keeping their money, people not spending their dollars. And it’s been proven over and over again that the reason people don’t spend their dollars is an emotional decision — it’s fear.

“We could look at this very practically and with statistics and facts, but even if we could prove that the impact of the law was minimal, the emotion of the impact is still there. And what’s fueling that emotion? Well, maybe it’s misinformation, but maybe it’s also just plain and simple uncertainty. Maybe it’s the reality that I’m sitting at my desk with payroll and expenses wondering, ‘What are my customers thinking?’”

The elements of the law intended to help small businesses did not impress Mr. Summers. The wages he pays are too high to qualify for the small-business health tax credit. His firm did receive a small rebate on its insurance premiums made possible by the law, but Mr. Summers dismissed the check as “something stupid” — less than $200.

“It just created another administrative task for my people,” he said. “It was ridiculous.”

As always, we’d like to hear from you. If you have an interesting story to tell about how you provide health care for your employees, please drop us a line.

Article source: http://boss.blogs.nytimes.com/2012/09/18/a-business-owner-expects-the-worst-from-health-insurance-overhaul/?partner=rss&emc=rss

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