- Associated Press - Monday, February 2, 2015

BISMARCK, N.D. (AP) - Denny Sotebeer used to offer a popular health insurance plan to employees at the six McDonald’s he owns in the Bismarck-Mandan area.

Workers could get coverage for a decent price - as little as $40 a month.

But the insurance he offered did not meet the requirements of the Affordable Care Act, so Sotebeer had to change course.

He recently sent a letter to 160 employees he deemed eligible for a new plan that meets the rules of the law’s employer mandate provision.

“There are probably a little less than 30 people who have sent back and said they want it,” Sotebeer told The Bismarck Tribune (https://bit.ly/1w9k4N4 ).

“That’s a lot less than I expected.”

High premiums are likely to blame for the lack of sign-ups, Sotebeer said. An employee making $12 per hour could pay as much as $182 per month for coverage - that’s more than four times as much as some of his workers paid under the old plan.

Sotebeer is not the only one trying to make sense of the employer mandate before the first round of penalties hits. The Bismarck-Mandan Chamber of Commerce estimates that at least 75 businesses in the area have more than 100 full-time equivalent employees and are expected offer health insurance this year.

“It’s the most confusing thing we have ever had to enact,” Sotebeer said.

Before President Barack Obama had even signed the bill into law, the far-reaching implications of the mandate halted the plans of some businesses that wanted to offer coverage.

The management at Bismarck-based Dakota Staffing Solutions looked into providing insurance after the business opened seven years ago.

“We just dropped it and waited until the health care law was passed,” said Jim Fettig, one of the owners. “We didn’t want to develop a plan and redo the whole plan because it didn’t qualify.”

The mandate generally requires employers with more than 100 employees to offer insurance to at least 70 percent in 2015 or pay a fine. The next year, employers with more than 50 workers must offer coverage to at least 95 percent of those people.

People familiar with the law say the number of businesses that will need to add insurance or pay a fine is not terribly high in North Dakota.

Ross Manson, a principal with the Fargo-based Eide Bailly certified public accounting and business advisory firm, estimated that more than 90 percent of the state’s businesses with more than 100 employees offered insurance before the mandate took effect.

And North Dakota is in a unique position thanks to the energy boom.

“We have seen the vast majority of employers offer coverage partly because we are a state starving for employees to work,” said Luther Stueland, director of health care policy at Blue Cross Blue Shield of North Dakota.

Manson said companies that did not previously offer insurance are unlikely to start.

“They’re probably looking at the penalty route as a cheaper cost for them,” he said.

He estimated a business would need to contribute at least $3,000 per employee to premiums each year to meet the affordability threshold set by the employer mandate. The threshold puts a cap on the amount of a worker’s household income that can go toward their premium - no more than 9.56 percent.

The cost to employers adds up to significantly more than the $2,084-per-employee penalty businesses must pay if they forgo offering insurance.

Sotebeer said it would be cheaper for him to stop offering insurance in 2015 and pay the penalty, but that seemed like the wrong choice for his employees.

“If they have insurance with me, I think they’re more apt to stay with me,” he said.

Before the employer mandate took effect, some people speculated businesses would skirt the rules by cutting the number of hours their employees worked.

The mandate requires employers to offer coverage to employees who work at least 30 hours per week.

Manson said he has heard of some people whose hours have been reduced as a result of the mandate, but that practice is not widespread.

It tends to happen in the service industry, where some people who used to work 28 to 34 hours per week are now limited to 30, he said.

“I wouldn’t say a lot of businesses with people with full-time status drop hours to get below the 30-hour threshold,” he said.

A bill passed the U.S. House of Representatives recently that would classify full-time employment as working 40 - rather than 30 - hours per week. It faces an uphill battle, as the White House has already said President Barack Obama would veto the Republican-backed measure.

Sotebeer said he prefers lawmakers keep the trigger at 30 hours because insurance offers an extra incentive for employees who work between 30 to 40 hours per week to stay.

Manson suggested a better threshold would fall in the middle. A fair amount of workers could see their hours cut below 40 if the bill were to become law, he said.

As businesses navigate the complexities of the employer mandate, some report an increased administrative burden.

“I had a part-time person that was doing just payroll,” Sotebeer said. “Now, we’ll have to give that person additional hours.”

Employers have to report information to the Internal Revenue Service to demonstrate compliance. They must validate that they have enough employees to fall under the employer mandate rules. Then, they need to break down the number of the full-time and part-time employees, demonstrate they have offered insurance to those deemed eligible and continue to track hours in case a worker’s eligibility changes.

Manson said companies need to get on top of monitoring that information so they don’t have to scramble when it comes time to report to the IRS next year.

Fettig said his partner at Dakota Staffing Solutions recently suggested hiring another person to help wade through the task.

He estimated that businesses offering coverage for the first time could see their operating costs rise as much as 15 percent between having to pay premiums and keeping up on the administrative end.

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Information from: Bismarck Tribune, https://www.bismarcktribune.com

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