By Gabe Nelson, Crain News Service
DETROIT (July 9, 2013) — Car dealerships, like many small businesses, will have an extra year to grapple with a key provision of the U.S. National Health Care Act. The question is: Will they make the most of it?
The Obama administration said last week that it will wait until 2015 to enforce the so-called employer mandate, which requires businesses with the equivalent of 50 or more full-time employees to offer health insurance coverage to full-timers or pay fines of as much as $3,000 a year per employee.
The reprieve came as a relief to auto dealers, many of whom have been slow to move toward compliance as they consider whether they're better off insuring their employees, enduring the fines that come with non-compliance, or finding a way to exempt themselves from the mandate.
But the National Automobile Dealers Association (NADA) and experts on the healthcare law say dealers shouldn't look at the administration's decision as cause for delay.
It would be a "huge mistake" for dealers to wait until this time next year to have a plan in place, said Marcus Newman, an insurance consultant from Chicago who has 10 dealerships among his 500 small-business clients.
Mr. Newman, vice president of the employee benefits division at consulting firm GCG Financial, said he's hearing from dealers wondering whether the employer mandate has been repealed. "But nothing has really changed," he said.
NADA has similar concerns. The trade group has long fought the healthcare law on the grounds that it ultimately would raise health insurance costs, putting a burden on its auto dealer membership. Now NADA is strongly urging members to figure out how to comply.
"Doing so sooner rather than later is probably a far better business decision," NADA spokesman Bailey Wood said in an interview last week.
NADA's position is a sign of how it has shifted its message since the president won re-election in November. In December, NADA started holding frequent online seminars to help dealers comply with the law. The group also held six seminars on the subject during its convention this February in Orlando, Fla.
As long as Mr. Obama holds the White House, the group has concluded, dealers cannot sit back and hope that Congress will undo the law.
"It's the law of the land, and we simply have to live with it, whether we like it or not," Ms. Wood said.
For car dealers, living with the law means puzzling over a math problem with many variables. How many employees are there, and how many hours do they work? How many have health insurance already? What do they pay in premiums? And how do the costs of insurance compare with the fines?What should dealers do?
Benefits consultant Marcus Newman is advising auto dealers to move quickly toward compliance with the employer mandate by taking these steps:
• Determine the added costs of providing or increasing coverage;
• Develop a plan to tell employees how the law may affect them;
• Create a benefit enrollment system, using technology, that allows employees to research and sign up for plans themselves;
• Continually monitor the costs of compliance; and
• Initiate wellness education programs to keep costs down.
The law defines full-time employees as those who work at least 30 hours a week.
Mr. Newman cites the case of one of his clients, a 70-person dealership that had no coverage for 30 of its employees. Giving coverage to those 30 employees with sufficiently low premiums would cost the dealership $108,000 a year, Mr. Newman said, or $3,600 per employee.
He noted, though, that insurance benefits are tax-deductible, while penalties aren't.
Most large car dealerships offer healthcare plans to most employees now, so the impact on them will be muted, Mr. Newman said. Smaller dealerships are the ones that should be "sweating" about seeing a sharp increase in costs, he added.
Bob Shuman, owner of Shuman Chrysler-Dodge-Jeep-Ram in Walled Lake, Mich., said he is agonizing over whether to take the penalty or continue offering insurance to his 55 full-time employees.
Costwise, Mr. Shuman said, he'd be better off paying the fines. But he's also concerned about competing for talent against other businesses. For now, he said, he's leaning toward continuing coverage.
Mr. Newman said some of his dealer clients are considering reducing staff to get below the law's 50-employee threshold. "We also have a lot of conversations about scheduling hourly employees to not work 30 hours a week, so they are not eligible to participate in the plan," Mr. Newman said. "But it's much more profitable to grow the company than to keep it under 50 just to avoid compliance."
After last year's Supreme Court ruling upholding most of the healthcare law, Judith Krupnick, president of Cherry Hill Volvo in Cherry Hill, N.J., trimmed her work force to the equivalent of 47 full-time employees, down from 54 last July.
Following the administration's decision last week, Ms. Krupnick said she still thinks she did the "right thing" for her dealership, given the state of the economy.
Down the road, though, Ms. Krupnick said she'll have to decide what type of insurance to offer employees, even if her Volvo store remains small enough to avoid fines.
"We've been in business such a long time, and our employees have been here so long—I want to do what's right," Ms. Krupnick said. "So I need to look at all the options."
Reporters Jamie LaReau and Adam Rubenfire contributed to this report, which appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.