Maine businesses need to prepare for health care law’s implementation

PORTLAND, Maine — With the U.S. Supreme Court’s decision to uphold most parts of President Barack Obama’s health care reform law , Maine businesses must start planning for when the law goes into effect.

“The first thing is for companies to acknowledge now that this is going to happen,” said Steve Gerlach, a labor/employment attorney with Bernstein Shur. “You need to have a person or committee responsible for developing strategies and making decisions around reform, around pay or play, with folks from finance, legal, tax and human resources. They should be identifying strategies to address short- and long-term issues on cost, compliance, how this is going to affect the overall compensation package of the company, and the tax picture, as well.”

The court’s decision, announced Thursday morning, upheld the centerpiece of the health care overhaul law, which requires that most Americans get insurance by 2014 or pay a financial penalty, known as the “individual mandate.”

David Clough, Maine state director for the right-leaning National Federation of Independent Business, said Maine companies already worried about the increase in cost and administrative work from the act will see the decision as a “major disappointment.”

Clough said companies are concerned the provision of the law that means companies with 50 or more employees will need to provide “minimal essential coverage” for health insurance or pay a penalty for not doing so. Another worry is that the health insurance tax imposed on insurers will get passed down to policyholders, he said. And for individuals who own small, one- or two-person businesses, their concern is how to afford the individual mandate, he said.

Ralph Wallace, chief financial officer at Trask-Decrow Machinery Inc. in Scarborough, said he was surprised at the ruling but didn’t think it would affect his business. The company has 36 employees and already provides health insurance benefits, he said. The economy has been tough for industrial-components suppliers such as Trask-Decrow, he noted, and it will take a serious recovery to push the company over 50 employees.

If the firm has a chance to expand beyond 50, it would do so without worrying about extra costs, he said.

Beth Fitzgerald, owner of the Portland-based Maine Wedding Co., an online directory of venues and services for planning Maine weddings, said when she read the news on her computer this morning about the decision, she started crying.

“It just feels so monumental. As a businessperson, we struggle all the time, trying to figure out health care,” said Fitzgerald. “We want to hire good people, we want to provide health care, but it’s so expensive. It’s our biggest concern.

“Anything that gives business owners a break on it is fantastic.”

Fitzgerald said she didn’t think the individual mandate would survive the Supreme Court.

The company employs only her, but Fitzgerald said as the economy turns around, she’d hope to be able to hire some people — and afford to give them a decent benefits package. She hopes that will become possible with the competition prompted by the health care exchanges.

Fitzgerald said she and her husband pay for their own insurance, $12,000 to $15,000 a year that “covers nothing.” She said she hopes rates will go down for her family’s coverage as a result of the act. She added that she knew some businesspeople were unhappy with the mandate.

“It rallies competition and will bring down the cost for everyone,” said Fitzgerald. “We have to start somewhere.”

Gerlach, the attorney, said the “pay or play” aspect of the law likely will have the biggest impact on employers in Maine.

A plan providing “minimal essential coverage” is basically a typical health insurance plan, said Gerlach. But it must be affordable, he added, which is measured as not being more than 9.5 percent of an employee’s household income. That will create some administrative work for employers, he said.

Companies of that size will need to do a cost-benefit analysis to see whether it would cost less to provide insurance or pay the penalties, he said. While he expected the answer would be that the penalty likely would cost less, there are other factors at play, he noted. There’s a generally held expectation in the labor market that health insurance is a provided benefit and this may increase that expectation.

Companies also could use such provision of benefits as a work force attraction and retention tool — making them more competitive in that arena than other companies that choose to opt out.

Gerlach said companies approaching 50 people will need to carefully analyze whether further growth makes sense, given the added costs of expansion past that point. He also said there may be increased pressure on companies already that size to lay people off or recharacterize some employees as independent contractors, which he suggested was “very dangerous” given the amount of litigation at state and federal levels about misidentification of employees.

In the short run, the act has and will continue to create administrative problems for companies, but that likely will lessen with time as the law is adopted and accepted. The theory is the state exchanges will bring down costs by introducing more competition to the marketplace as individuals band together in the exchanges to buy health insurance. That could benefit the smaller, one- and two-person shops that dominate Maine’s landscape.