Two small rubber product manufacturers, two polar opposite opinions of the newly minted national health care law.
For Chuck Chaffee and Michael Meyer, CEO and executive vice president, respectively, of BRC Rubber & Plastics Inc. in Churubusco, Ind., the new law means they may stop offering health care coverage to their 584 employees.
“We'd pay the penalty and let everyone go on the government plan,” Meyer said. “We'd either be doubling our costs or cutting them in half.”
For Rich Balka, president of Home Rubber Co. & Ivanhoe Rubber in Trenton, N.J., the federal health care law is a respite. In New Jersey, state laws place draconian regulations on small employers who try to provide health care to workers even if—like Home Rubber—they're too small to bargain with insurers, he said.
“I think I'm in a pretty good niche” as far as the health care legislation is concerned, said Balka, who has between 25 and 50 employees. “It can't be as bad as the 10- to 15-percent increases in health insurance premiums we've been looking at annually.”
Differences on the value of the law aside, executives and others in the rubber industry agree the full effect of the Obama health care plan can't be known yet, particularly because many of its major provisions don't become effective until 2014 or after. Yet one thing is apparent: if you're a small rubber manufacturer, how the new law will affect you depends greatly on how the law defines “small.”
Winner and losers
For employers in general, the new law is a mixed bag, according to John Sarno, president of the Employers Association of New Jersey and a health care law professor at Fairleigh Dickinson University.
“I think employers with fewer than 50 workers are not going to feel much of an impact short term,” Sarno said. “Most small employers, both in New Jersey and nationally, do not provide health care coverage. The tax breaks small employers will get from the health care law aren't sufficient incentives for those companies that aren't already buying health care coverage to start.”
However, employers with 50 or more workers—about 96 percent who already offer health care to their workers—will feel significant impact, according to Sarno.
“By 2014, those employers will have to meet universal standards, and I think there will be some cost to them,” he said. “The 4 percent who don't offer health care coverage will face a penalty for not doing it.”
The law allows individuals to set up a health care savings account of up to $2,500 per year, and some employers may simply choose to make tax-free contributions to their workers' health care savings accounts, Sarno said. “That's a win-win situation,” he said.
Advocates and opponents of the health care law both tend to be passionate, and nowhere is the difference of opinion more stark than in the public comments of the U.S. Chamber of Commerce and the United Steelworkers.
“The House made a wrong and unfortunate decision that ignores the will of the American people,” said Thomas J. Donohue, chamber president and CEO, in a statement on the House health care vote. “(The legislation) fails to fix what is broken and risks breaking what already works. It will drive up health care costs and make coverage less affordable for businesses and families.”
The health care plan, the chamber said in an open letter on its Web site, creates damaging new mandates on employers and imposes nearly $500 billion in new taxes while cutting some $500 billion from Medicare. The chamber quoted the Congressional Budget Office as saying the health care law will make individual health care premiums 10 to 13 percent more expensive than current policies.
On the opposite side, USW International President Leo W. Gerard called the vote a huge step in the right direction.
“Reform will help get our economy back on track by lowering skyrocketing health care costs, saving jobs and relieving working families and businesses from the crushing medical bills that are causing bankruptcy and heartache,” Gerard said.
While saying the bill wasn't perfect, Gerard quoted Obama administration numbers that it would extend health insurance coverage to 32 million uninsured Americans and cut federal deficits by $138 billion over the next decade.
The USW likes various aspects of the health care bill, such as coverage for children and portability of coverage for workers who lose their jobs or change jobs, according to Stan Johnson, USW secretary-treasurer.
While the new law's value as a bargaining tool would probably vary on a case-by-case basis, it at least makes plain that arbitrary employer decisions on health care would not be allowed, Johnson said.
“We see this as a very good, progressive move,” he said. “We believe the law can be modified going on, but this first step toward health care for all will lead to better health care for most.”
A tale of two employers
Chaffee, who won Rubber & Plastics News' Rubber Industry Executive of the Year Award in 2009, and Meyer pride themselves on the Blue Cross health insurance policy they offer to BRC employees.
That policy, they said, pays roughly 75 percent of employees' health care costs. About 330 of BRC employees, or slightly more than half, choose to buy into the policy.
“We're a small company, and we've got good coverage for our people,” Chaffee said. “It doesn't pay for dental or eyeglasses, but it does pay for the stuff that will keep them healthy.”
Some BRC employees obtain insurance through their spouses, while others—particularly the young-er ones—choose not to deduct the co-pay from their paychecks to buy the insurance, Chaffee and Meyer said.
In any case, the insurance package costs the company just under $2 million annually, and BRC can't afford the extra $2 million it probably will have to pay under the new health care law's mandate, they said.
“I don't understand it,” Meyer said. “Eighty-five percent of Americans are covered by health insurance, and they have to pay for coverage for those who don't necessarily want it. We could see changing the whole health care system if it were the other way around.”
At Home Rubber, the health care situation has been somewhat different, according to Balka.
“Until about a year ago, we paid two-thirds of our employees' medical expenses, whether they needed them as individuals, couples or families,” he said. “But the increases in the premiums got so bad that a year ago we changed to paying a fixed amount.
“At current coverage levels, that still accounts for at least two-thirds of medical expenses, but a fixed amount means that premium increases moving forward are passed on to employees,” he said.
At least one Home Rubber employee has a spouse with a potentially catastrophic disease, according to Balka. “There's no way in good conscience I could allow them to get individual coverage, because that disease would have been excluded,” he said.
As a small employer in New Jersey, Balka said, he faces state laws that lean heavily on businesses to buy health insurance for their employees, but only allows larger employers (50 or more workers) to negotiate for premium rates.
“Before buying Home Rubber, I had a small business in Pennsylvania,” he said. “There, I was able to go through the Chamber of Commerce and get much better coverage for much lower rates. New Jersey has no provisions for small groups to pull together to buy insurance.”
Like other employers, Balka isn't exactly sure yet how the new health care law will affect his business. Because Home Rubber has more than 25 employees, it isn't eligible for the law's tax breaks to small businesses for providing coverage. Nevertheless, he thinks and hopes it will offer at least some improvement over the current situation. Indeed, he would have liked to have seen the final version contain more of a “government option,” like the Canadian health care system.
“My sister has dual American and Canadian citizenship, and she lives in Canada,” he said. “The people in this country are scared of socialism, but my sister personally has never had a problem with the Canadian system. She does a bit of consulting for the Canadian health care industry, and she thinks it's fantastic.”
Republicans in Congress and in state governments have raised a hue-and-cry against the new health care law, both before and after its passage. So have conservative pundits: the week after the bill's passage, The Weekly Standard had “REPEAL” across its cover in large red letters, while National Review had “HELL, NO!” on its cover.
The attorneys-general of 14 states have filed suit against the federal government, arguing that the health care law is unconstitutional. Such lawsuits apparently suit BRC's Chaffee and Meyer just fine.
“Our employees didn't want this coverage to begin with,” Chaffee said. “They won't be voting for the representatives who voted for it, I can tell you. I just don't understand how this passed with the public not supporting it.”
But no matter how much public support a repeal effort gets, it has next to no chance of succeeding, according to Sarno.
“There were a lot of big winners here,” he said. “Pharmaceutical companies, hospitals, insurance companies were all big winners. And also there are a lot of people with pre-existing conditions who have vested interests in this law. A repeal will be tough to sell.”