Uncertainty Looms for S.C. Business Owners as Latest Obamacare Mandates Approach

June 17, 2013

Investigative Reports

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Ship in StormJackie Fowler wonders out loud if she will be able to continue offering health insurance to her employees at her Columbia office furniture store known as The Office Place.

“It’s kind of wait and see,” said Fowler, who has been in business with her husband, Lee Fowler, for about 25 years. “I think they’re making it up as they go along.”

With just a little more than than six months before the next round of regulations under the federal Patient Protection and Affordable Care Act, commonly referred to as “Obamacare,” takes effect, the Fowlers and other Palmetto State business owners surveyed by The Nervesay they still have few, if any, details about how those changes will affect their companies.

“We’ve shopped around and found some affordable plans, but it may come to an end,” said Fowler, who noted her and husband’s business offers health insurance to their dozen employees.

“The only thing about Obamacare is that it has created a mindset – all of us are on our heels playing defense,” said Det Haislip, who owns True Value Hardware & Appliances in downtown Aiken with his wife, Lyanne Haislip. The store has six employees, he said.

Obamacare mandates slated for next year include, according to research by Americans for Tax Reform (ATR), a nonprofit lobbying organization in Washington, D.C., that opposes tax increases; and the South Carolina Policy Council (SCPC), The Nerve’s parent organization:

  • A penalty of $2,000 per full-time employee on businesses with more than 50 workers if those companies don’t offer a minimum level of health insurance. The penalty increases to $3,000 for each employee receiving coverage through a health insurance exchange and is eligible for federal tax subsidies. More than 2,000 South Carolina companies would be affected by those mandates;
  • An income surtax of 1 percent of adjusted gross income (AGI) or $95, whichever is higher, for individuals who don’t buy “qualifying” health insurance. The individual surtax increases to 2 percent of AGI or $325 in 2015, and 2.5 percent of AGI or $695 in 2016; and
  • New annual taxes on health insurers tied to insurance premiums collected that year; fully imposed on companies with $50 million in profits.

Other Obamacare tax hikes that took effect this year include, according to research by ATR and SCPC:

  • A 3.8 percent surtax on investment income for joint filers with adjusted gross incomes above $250,000 (above $200,000 for individuals);
  • A Medicare payroll tax hike of .9 percent on earned income over $250,000 for joint filers (over $200,000 for individuals), and
  • A 2.3 percent excise tax on medical device manufacturers. In South Carolina, there are more than 800 listed medical and equipment device companies, according to the online business site manta.com.

Contacted last week by The Nerve, William Lowndes III, chairman and CEO of the Spartanburg-based Tindall Corp., which manufactures precast concrete systems for educational, commercial, industrial and parking structures, said he doesn’t yet how the upcoming federal mandates will affect his approximately 800 employees in the company’s South Carolina, Georgia, Virginia, Mississippi and Texas divisions.

“I don’t know what our situation is going to be; I know it’s going to be different come Jan. 1,” said Lowndes, a South Carolina Policy Council board member. “We are self-insured, so I think that will help us.”

Other Palmetto State employers contacted by The Nerve last week also had more questions than answers about Obamacare.

“I’m just like the stock market,” said Joe Trainor, owner of the Stokes-Trainor car dealership in Newberry. “They don’t like change. They want to know what the rules are.”

Trainor, who noted he has about 42 employees, said he doesn’t know if the 2014 mandates will affect health insurance coverage for his workers, noting, “It will probably take another year and a half to see if our rates are really going up and our coverage is going down.”

Billy Walker, a veteran personal-injury trial lawyer and partner in the 15-employee law firm of Walker & Morgan in Lexington, said the problems with health care coverage nationwide is “more endemic than Obamacare.” He contended that states, including South Carolina, have been allowed to stifle competition in the health insurance industry primarily because of a 1945 federal law, known as the McCarran-Ferguson Act, which exempts insurance companies from federal anti-trust laws.

“They (insurance companies) operate with complete impunity,” Walker said. “Until they repeal that (the McCarran-Ferguson Act), there will be no regulation at the state level.”

U.S. Rep. Paul Gosar, R-Arizona, introduced legislation in his first year in office in 2011 and again this year (H.R. 911) that would repeal the 1945 law, though in both cases, his bill didn’t move out of committee.

South Carolina has one of the least competitive health insurance markets in the country when it comes to preferred provider organizations (PPOs), with BlueCross BlueShield of South Carolina covering 60 percent of the market in the Palmetto State, according to an American Medical Association study released in December.

BlueCross BlueShield also has a well-known presence in South Carolina’s political circles. Last year, for example, the insurer tied for third among 528 lobbyist principals in total campaign contributions ($43,500), The Nerve found in a review of State Election Commission records. In 2012, the company ranked 41st out of the 528 lobbyist principals in total lobbyist payments ($75,700), records show.

Several South Carolina business owners contacted by The Nerve questioned whether employers should even offer health insurance to their workers.

“I’m not in the insurance business,” said Archie Trawick, owner of Jake’s Landing marina in Lexington County, which employs six workers, two of them full-time. “Why shouldn’t insurance be the individual’s responsibility, and it goes with them (when they go to another job)? It should be pre-tax.”

“It’s not really fair to employees,” said Jackie Fowler of The Office Place in Columbia. “They’re really limited to what I choose.”

“I really think there should be a better system,” she continued. “I would rather pay them more money and let them buy what they want.”

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and on Twitter @thenervesc.