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Catharine Richert, Published August 19 2013

Minnesota businesses struggle with ACA 'employer mandate'

A while back, D. Brian’s All Natural Deli and Catering owner Doug Sams grappled with a tough decision.

Under the Affordable Care Act, also known as Obamacare, Sams has to offer his 80 full-time employees in the Twin Cities health insurance coverage. If he doesn’t, he faces hefty fines.

At first, Sams thought he would pay the penalty. But he decided that was too much.

Next, he considered cutting back his employees’ hours. The law’s “employer mandate” only applies to businesses with more than 50 employees who work more than 30 hours a week.

But trimming schedules would have been unpopular and unfair to his staff, Sams said.

Sams settled on offering all his workers insurance through Blue Cross Blue Shield – and he hopes they don’t take him up on the offer.

“They’re paycheck to paycheck, their kids need new shoes, there’s never enough money … to pay the bills,” Sams said. “They look at me and say, ‘Doug, sounds great. I can’t afford it.’ ”

Sams estimates that seven new people will enroll in the company health plan, which will cost him about $17,000.

The employer mandate is complicated – so much so that last month, the Obama administration announced it would delay requiring employers to offer health insurance until 2015.

As Sams discovered, employers who run afoul of the law’s requirements face steep penalties.

Let’s say you have 50 or more full-time employees but don’t offer them insurance. If they work at least 30 hours a week, the law considers them full-time employees. If just one of them qualifies for a federal subsidy to buy coverage on the state’s health insurance exchange, you could be faced with a $2,000-per-employee annual fine – after you subtract the first 30 employees.

Even if you do offer insurance, you could be hit with a penalty if you don’t offer a certain minimum coverage to at least 95 percent of your payroll employees.

The administration’s decision to delay the mandate by a year is a reprieve for some businesses, but that doesn’t mean they’ve stopped reviewing their options, said Donn Scroggins, senior vice president of employee benefits for Marsh & McLennan Companies, a human resources consulting firm.

“Most of them are weighing the cost/benefit of ‘do I offer coverage, or don’t I? Do I reduce hours to less than 30 hours or do we increase it?’” Scroggins said.