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Operators are struggling to determine whether it makes more sense to provide health coverage or pay the penalties tied to PPACA noncompliance. This article ran in the Dec. 17, 2012, issue of NRN. Subscribe today.
Employee sticker shock
The high price tag could likely make employees balk, too, according to employers like Bower, who puts the cost to eligible Popeyes employees at $130 per month.
“Right now we offer a mini medical plan to all hourly employees, and their contribution is $10 a month,” he said, noting that Popeyes contributes $36.60 each month toward an hourly employee’s insurance.
“Even at that cost, only 5 percent of our hourly employees participate,” he said. “How can we expect they’ll want to pay $130 a month?”
Bower noted that the law also stipulates single-member-household employees whose annual income exceeds $14,865 must purchase some form of insurance or face a fine of $100 in 2014. Should employees decline insurance provided by an employer, they must purchase it from a state health insurance exchange. Currently, 17 states have said they won’t create insurance exchanges, which, according to the new law, puts the burden onto the federal government.
While the fine to the employee increases markedly with each year, Bower said, “it’s still considerably less than what they’d pay for the actual insurance. … And does the IRS really have the ability or the desire to collect those fines? And who would want to be so politically unpopular to enforce those collections?”
Belinda Sharp, vice president of human resources at 712-unit Ruby Tuesday, said insuring tipped employees will be particularly challenging in states where those employees’ hourly rates are well below minimum wage. Servers, in particular, often make so much in tips that what they must pay in taxes reduces their paychecks to nothing — or less.
“We’re still looking for guidance in the law in that area,” said Sharp, adding that the company has worked to prepare for compliance since the PPACA was passed. If the company is responsible for gathering tipped employees’ insurance contributions, she said “that puts us in the position of being bill collectors, which isn’t good for morale. So, since so many don’t get a check at all, do we extend credit to tipped employees to cover that [insurance premium]? It’s a whole can of worms we’ve got to open up.”
The Maryville, Tenn.-based chain also is investing significant resources into revamping I.T. systems to comply with new reporting requirements. Sharp said the company has to disclose to employees and the federal government what it’s paying in insurance premiums. In addition, she said she suspects states may have their own unique reporting demands.
“That’s a big burden that will result in increased administration costs,” Sharp said.