Standards & Legislation

Health Care Law Creates Problems for Businesses

April 25, 2011
KEYWORDS business / management
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In March 2010, President Obama signed the Patient Protection and Affordable Care Act (PPACA) into law. Now, a little more than a year later, the health care law is beginning to be implemented although it is facing challenges in the court and in Congress. The NEWS recently asked HVAC contractors if the law has started to affect their businesses, and how they anticipate it will affect the coverage and benefits they offer in the future.

Currently, many contractors reported a lot of uncertainty about the law’s effects and concerns about the law’s impact on insurance costs. They also expressed a range of opinions about the law’s future, with many expressing support for complete or partial repeal.

EFFECTS ON CONTRACTORS

Many HVAC contractors said the PPACA has not yet affected them. “We have had no change so far,” said Lee Rosenberg, PE, chairman of Rosenberg Indoor Comfort (San Antonio). Although the law was passed in 2010, many of its provisions do not go into effect until 2014. Despite this delay in the law’s overall implementation, some contractors have observed that their insurance costs are rising, and they believe that this is due to the new law’s early effects.

As of Sept. 23, 2010, the PPACA mandates that children be allowed on parents’ insurance until age 26. There has been a mixed reaction to this change. “This has caused our costs to go up for sure,” said Hank Bloom, president of ECS (Mentor, Ohio). However, he continued, “I do think the [coverage through] age 25 is good because most are still in school.”

James Hussey, president of Marina Mechanical (San Leandro, Calif.), said that this change has been received positively at his company. “Many of our employees have older children in college. They all appreciate their children receiving coverage,” he said.

According to Craig Jones, vice president of Slasor Heating & Cooling Inc. (Livonia, Mich.), “Our insurance already covered children living at home and in college through age 25.” He said that his company has felt “no immediate impact yet other than the fact that insurance companies are getting ready - or have started already - to increase the premiums to cover the increased costs associated with the new mandates.”

Some contractors reported that they are already experiencing increased costs. Eric Kjelshus of Eric Kjelshus Energy (Greenwood, Mo.) said his costs have risen “an extra 21 percent just this year.”

Ken Bodwell of Innovative Service Solutions (Orlando, Fla.) added, “We incurred an additional $20,000 in overhead to provide the insurance this year. The employees saw an increase in deductibles at point of service. We also had to change insurance carriers to control the cost.”

John McCarthy Sr., president of P.H.E. Inc. (Omaha, Neb.) noted that what is often overlooked is that these added costs are passed along to consumers. “I think what people are forgetting is we will pass the added cost on to our clients,” he said. “The businesses do not pay taxes, they do not pay for health insurance, they do not pay for anything - they pass it on to our clients. Unfortunately, our clients get the cost increase passed on to them all the time.”

FUTURE PLANS FOR COVERAGE

As concerns about escalating costs continue, many HVAC contractors are unsure if they will be able to offer the same level of benefits to their employees in the future. There is still a lot of uncertainty surrounding how the bill’s new mandates will be put into place. In the meantime, some have said they are adopting a “wait-and-see” approach.

Russ Donnici, president of Mechanical Air Service Inc. (San Jose, Calif.), said that while he has no plans at present to change the medical and dental coverage he provides to employees, this may change in the future. “When and if Obamacare gets up and running, we will evaluate the situation at that time,” he said. “We provide a much better health plan than anything the government can; however, based on the way the law is structured, if there are any changes to our plan, then we get kicked into the government plan.”

As costs rise, it is expected that HVAC contractors will reduce the benefits they offer to employees. “Cost keeps rising, which causes us to cut back on benefits,” said James Herndon, president of Controlled Conditions Corp. (Chesapeake, Va.).

According to George “Butch” Welsch, president of Welsch Heating & Cooling Co. (St. Louis), the benefits his company offers will inevitably be reduced under the new law. “Our actuary tells us that the new law will increase our total cost around 3 to 4 percent, which could be as much as $600,000 to $800,000 per year. The benefits will have to be reduced as we can’t continue to raise contributions and stay competitive in the market.”

In contrast to this view, Greg Crumpton, president and founder of AirTight (Charlotte, N.C.), said that he has no plans to change the benefits he offers to his employees. “We work hard to provide a great benefits package. Part of that, in our mind, is to take the worry out of the employee’s mind so they can concentrate on taking care of our customers. Unless things really change or get tweaked, we do not foresee any changes.”

Others noted that the legal challenges and repeal efforts are adding to their uncertainty about how to approach health care. According to the Wall Street Journal, 28 states have challenged the constitutionality of the PPACA in court. And in mid-January, the Republican-controlled House of Representatives passed a bill to repeal the health care law. Although this bill is not expected to gain any traction in the Senate and would be vetoed by the president, additional measures are being introduced in Congress that, if passed, would limit the impact of PPACA.

Because the law faces these challenges, contractors must struggle even more to determine how to plan for its implementation. Paul Sammataro, president of Samm’s Heating and Air Conditioning (Plano, Texas) said, “If it is not ruled unconstitutional or defunded, we will make changes that will best suit our employees and company.”

This uncertainty can also affect businesses in other ways. Although Tommy Castellano of Castellano’s Air Conditioning & Heating (Tampa, Fla.) does not currently provide health care benefits to employees, he said he has streamlined his business operations “due to the fact nobody knows how this is going to affect small businesses.” He added, “We do not plan on hiring until this is worked out.”

OPINIONS ON REPEAL

It remains to be seen how the courts, Congress, and constituents will affect the implementation of PPACA, but as the debate over health care continues, HVAC contractors are weighing in. While their opinions range from apathetic to accepting to anti, it appears that many in the industry support complete or partial repeal of the law.

An example of a contractor who isn’t as concerned is Walter Mott, owner of Dean’s Shop (Staples, Texas). “Not to put my head in the sand, but I can’t worry about what Washington may or may not do,” he said. “I must stay at or ahead of what small business in general is doing.”

Ann Kahn, president of Kahn Mechanical Contractors (Dallas) said that while some portions of the bill do merit repeal, others do not. “I wouldn’t recommend throwing the baby out with the bath water,” she said, although she does support repealing Section 9007’s 1099 reporting requirement.

One contractor who expressed even greater support for the law, Hussey, said the PPACA law should absolutely not be repealed. “Health care in this country is abysmal. Even those who can afford the best health insurance receive marginal care at best,” he said. “The private sector has run health care for my entire life - 60 years - and care today is the worst I can remember. This track record does not give me any confidence in the politicians who claim the only solution is more of the same.”

However, supporters of the law appeared to be in the minority; more contractors expressed deep concern about the law, and many called for complete repeal. Martin Hoover, president of Empire Heating and Air (Decatur, Ga.) said that he supports repealing most of the law. “I agree health care needs reform,” he said, “but not governmental control. The private sector is certainly capable of change with a few new rules.”

To put it simply, Mike Beaver, president of Beaver Brothers Inc. (Salisbury, N.C.) said the law should be repealed because “it did not do what it was supposed to - lower the cost of health care.”

Joe Strickler, president of Refrigeration & Electric Service Inc. (Winter Haven, Fla.), agreed. “The supposed purpose of the law was to reduce cost,” he said. As a result, he supports repeal because he believes the PPACA will “increase cost and create a mess.”

Others cited more political reasons for repealing the law. Sammataro said, “I did not support the unknown bill when it was passed so I definitely support the repeal. The cost of the bill, taxpayers paying for abortions, no tort reform to reduce medical malpractice lawsuits, and business mandates are a few reasons why I support the repeal.”

Castellano added that he believes the law is unfair because many unions have been exempted from its mandates.

Yet those who support repeal also acknowledged that the current health care system is flawed, and some offered alternative solutions to replace the PPACA. Karl Roth, CEO of A.N. Roth Co. LLC (Louisville, Ky.) said, “I believe that tort reform is necessary, giving doctors the ability to treat people without ordering every test available just to cover their rears. Competition and the marketplace is the best place to regulate cost.”

Herndon added, “I think we could target actions that would cut cost, like allowing industry to form a group across state lines.”

For now, the only certainty is that the debate over PPACA will continue to rage. And as the health care law continues to face challenges in court and in Congress, contractors will have to keep playing the waiting game until it becomes clear exactly how much it will impact their businesses.

Publication date: 04/25/2011

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