Obamacare is another blow to many small businesses
New ideas to solve grand challenges require significant change. However, we must come up with winning solutions with broad consensus on the approach and where our entire society helps pay for the chosen solution. Too often government looks to fund new initiatives on the backs of business owners who are struggling to survive.
Small businesses are often hardest hit, and all businesses in Hawaii are highly overburdened compared with the rest of the nation in terms of our business climate. Now Obamacare is hurting many businesses even more, creating significant challenges for small businesses that are less able to accommodate significantly rising costs.
This is the story of a long-standing, family-owned Maui flower business whose owners recently learned that their health insurance premiums, one of the largest expenses in their monthly budget, are going up by more than 24 percent.
Why? Because they have a number of older workers and the new age-based Obamacare premium-rating system is hitting them hard. Of their 26 employees, 10 are older than 60. According to the company, premiums for those age 60 and over went from $387 per month per employee to $787 per month per employee, a $400 per month per person increase. Ouch!
Rates for some of their younger employees dropped from $387 per month per employee to $280, a saving of $107 per month per person per month, but the decrease does not offset the higher prices. (The rates for older employees goes way up and only marginally down for younger employees.)
In this case, the net hit is roughly $2,000 per month. That is $24,000 more per year and is more than the labor cost for an employee making $10 per hour, working full time, for one year.
It makes this and many businesses ask, “How does our government expect us to pay for this?” Business owners well understand their business model, which is ever-changing given our expanding global economy. This business has long been competing with businesses in other countries that have lower labor and operating costs. They know they cannot simply pass on a 24-plus percent increase to their customers. The market will not bear it.
This increase, in an attempt to do more good, is penalizing this business in a competitive marketplace. While their local competition is up against the same challenge, their international competition is not. Other countries are not contributing to our health care system when they do business here in the United States.
All employees of this company are considered family and the older workers have worked for the company for a very long time. The owners are now between a mountainous rock and a very hard place: “Are we now supposed to lay one of our workers off to cover this added expense? Do we have to cut several workers to part time to fix this? This is unbelievable!”
A flicker of hope emerged after the rules to the game recently changed. Insurance carriers can now allow businesses with existing plans that do not meet all the Obamacare requirements to be extended for one year. These business owners will certainly take this option. But, they do not know what the cost of their insurance will be during the extension because the program change was only just granted. Insurance carriers were not expecting to offer extensions, so they do not yet have those rates. The company is waiting for a response from the carrier.
While it gives the business a reprieve, the tough decision ultimately has to be made. It hurts, angers and lives within the owners each day, knowing the pain that lies ahead. They will be even more devastated when that day comes.
* Pamela Tumpap is president of the Maui Chamber of Commerce.