For business leaders in Brownsville and Harlingen, it’s the old game of “hurry up and wait.”
Call it what you like — health care reform, the Patient Protection and Affordable Care Act, or ObamaCare — the small businesses that make up the majority of local business in both cities still have little to no idea what’s in store for them, or for their employees.
“No one really knows what is in the law,” said Pam Priour, president and CEO of the Harlingen Area Chamber of Commerce. “And so, they are all kind of sitting tight, as far as the expansion of their business and new hiring and that kind of stuff — to see what happens, possibly because of the election.”
Republican presidential candidate Mitt Romney’s campaign website says that, if he’s elected in November, he immediately will issue an executive order granting health care waivers to all 50 states, and he will pursue policies to allow each state to craft its own health care plans.
“So, depending on what happens with the election, if the law holds, then we’ll see what’s written in the law and how it will affect their businesses and employees,” she said. “Everybody is just sitting tight. We’re just going to wait this out.”
The effect of that is that new hiring is stalled in the Rio Grande Valley, which historically has some of the highest unemployment rates in Texas, and the nation. According to the latest figures from the Bureau of Labor Statistics, unemployment in the Brownsville-Harlingen metropolitan statistical area is a little more than 11 percent.
“It’s a hesitancy to add employees because they (business owners) don’t know how it’s (the health care law) going to affect their bottom line,” Priour said.
Angela Burton, president and CEO of the Brownsville Area Chamber of Commerce, said she is hearing mostly the same kind of feedback.
“There is a lot of uncertainty among small business owners, and no one is completely sure how the Patient Protection and Afford-able Care Act will work,” Burton said via email. “There is a lot of speculation.”
Burton believes business owners eventually will be able to plan and make decisions based on knowing exactly what they are dealing with under the new health care law.
The employment picture in Brownsville is much the same as in Harlingen.
“A great deal of businesses have fewer than 50 employees,” Burton said of Brownsville. “So, from what I understand, the mandate will not affect those businesses.”
In Texas, small businesses are defined as having 50 or fewer employees. Those employers are not required to offer insurance, but companies with 50 or more employees who fail to offer “minimal essential” coverage, or those that offer coverage that is not of “minimum value” or “affordable” will face a penalty, according to Holland Powell, president and CEO of Benefit Development Group, a firm that helps businesses with health care-related issues.
In Cameron County, many businesses are evaluating how they’ll be affected. For example, Big Daddy’s Seafood and Cajun Kitchen, a restaurant on South Padre Island, has more than 50 employees.
“I think on some level that health care law will affect how we have to handle out employees,” office manager Brian Salazar said.
The company’s certified public accountants and insurance people are studying the organization and law and advising the restaurant on how it should approach the law, he said.
GEARING UP FOR 2014
Chris Wright, a certified public accountant in Harlingen, has been holding seminars for local businesses to help them know what to expect from the health care law, in addition to advising his clients and preparing them for compliance with the new law.
Wright has clients who are exploring a multitude of strategies in response to the health care law.
“I have one employer that wants to see what the cost is, to see if he wants to pay the penalty,” he said.
Another client already has decided on a strategy, though.
“I have one client that is just looking at paying the penalty,” he said. “They’re right over the (50 employee) threshold.”
But business is creative, and Wright described another client who is looking at restructuring ownership to get below the 50-employee threshold.
“Another client with several retail outlets is looking at restructuring ownership so it’s not a controlled group, so he can fall under the 50-employee guidelines,” Wright said.
Wright said many of his clients are exploring a variety of scenarios, and remain uncertain about what the law means for them.
“The questions were all over the board. I did research on the individual and how it affects corporations, too,” he said. “The health care law required the mandate and it put new taxes into place. There’s new taxes in addition to the requirements on individuals and businesses.”
As it stands now, many of his clients are just trying to determine how many full-time employees they have.
“They’ll take part-time employees and see what the equivalent to full-time employees is. There is a formula they use to determine that,” he said. “It’s becoming real creative to try and find out if you qualify or not.”
Priour, too, said she has heard from some employers who may just pay the fine.
“If it’s cheaper for them to pay the fine, if it costs them less, then it will be an option,” she said. “I’m not saying they are all going to do it, but it will certainly be an option.”
And Priour said that kind of bothers her, because some local companies are buying the best health care insurance they can for their employees.
“They have some nice health plans. If they end up going into the pool of the federal government, then their health care insurance is going to cost more, prescriptions are going to cost more, their deductibles will be higher,” she said. “So it has an effect on both the employers and employees.”
One larger business recently made headlines for the way it will approach the health care law.
Darden Restaurants has a variety of chains, many in Harlingen and Brownsville. Darden runs the Red Lobster, Olive Garden and Longhorn Steakhouse brands.
Rich Jeffers, a spokesman for Darden, said the company is testing a strategy that revolves around part-time employees.
“No final decision has been made if we will pursue this beyond the test. Today, 75 percent of our workforce is part time. This is not a massive move from full-time to part-time,” he said. “Today, we have 75 percent at 30 hours or less. Can we continue to do this with even more part-time employees, with a mixture?”
The company’s labor model is one way it is approaching the health care law, he said.
“We know there will be significant costs. We offer access to health care to all of our employees today,” he said. “We know that the affordable care will eliminate the type of plan that most of our part-time workers use. It’s a limited plan, but it works for them.”
Unlike many small businesses in Harlingen and Brownsville, he said, Darden is not guessing about who the president will be and what it will mean for the health care law.
“We are working under the assumption that the legislation has been passed, and we’re not going to speculate beyond that,” he said.
“This is not a Darden issue. This is a business issue and plenty of other businesses are dealing with the same issue.”