Dealers brace for health care sticker shock
Baker: Issue isn’t going away
ORLANDO -- Two years of hoping the national health care law would go away have left many auto dealers unprepared for changes that take effect Jan. 1.
Dealers have 10 months left to re-evaluate and restructure their employee health care benefits under the Affordable Care Act. Complying with the act could leave many dealers with sticker shock, warns Anita Baker, managing partner for employee benefits plans at CliftonLarsonAllen, an accounting firm that represents about 600 dealerships around the country.
The new law is complex, and in some cases dealers could face federal penalties of $3,000 a year per full-time employee, depending on how benefits are provided.
"A lot of dealers have been assuming since 2010 that this issue would all go away and so they haven't made plans yet," says Baker, who helped lead workshops on the topic during the National Automobile Dealers Association convention.
"Even after the Supreme Court affirmed the act last summer, some people waited for the presidential election in November to see if the situation was going to change. Now they're unprepared," she said.
As recently as last week at the ' convention, 2013 NADA Chairman David Westcott, a Buick-GMC dealer from Burlington, N.C., vowed to keep up the fight to change the new law.
But unless that happens before year end, retailers must have their plans in place by Jan. 1. The penalties for not providing benefits after that are $2,000 a year per full-time employee.
It will not be enough just to offer benefits. According to the law, coverage must be affordable for the employee. The offered benefits also must not discriminate between high-income employees and lower-wage ones. Companies with discriminatory plans after Jan. 1 face penalties of $100 a day per employee, up to $500,000.
Even dealerships with robust coverage in place can expect a 30 percent rise in health care premiums, Baker says. Administrative fees will cost dealers $63 a year for every covered employee and dependent.
Among the questions many dealers face: Is it cheaper for dealerships to raise their health care benefits or pay new federal penalties for not providing enough? Is it cost-advantageous to bump some full-time employees to part-time status to sidestep requirements?
And the biggest question: How much will it cost? States are still forming plans for health insurance "exchanges" that will enable employers to find competitive plans.
Baker reports that some auto dealers are signaling that there is more to their decision process than dollars and cents.
"This also becomes a competitive issue for a dealership, whether it's a large employer or a small one," she says. "It becomes a factor in how you recruit and retain employees."
You can reach Lindsay Chappell at firstname.lastname@example.org.