Reform on the West and South Side
New Age Chicago Furniture, a fourth-generation, family-owned furniture retailer on Chicago’s South Cottage Grove Avenue, has offered discount furniture to its South Side community for 80 years. What it can’t offer is health care coverage to its employees, who can’t afford to insure themselves.
“Ever since the passage of the health reform bill, our mentality hasn’t changed,” says storeowner Loren Pikofsky, who says none of his employees have significant health issues or pre-existing conditions, most are not insured on their own, and those who do have children aren’t likely to have them on All Kids. “The business takes care of my coverage, my family’s and my mom’s,” he continues. “But as far as employees, there’s been no change. I spoke to our accountant about it, and we passed over it, because we weren’t any better off.”
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Pikofsky also asked employees if they wanted to talk with insurance representatives. “They did originally, but they figured out they couldn’t afford it,” he recalls.
Many South and West Side small companies will be impacted by health reform in one way or another. For instance, even if New Age doesn’t enroll in the health insurance exchange that Illinois will be implementing, its employees will be required to buy health insurance and will need to understand their options. But most small South and West side businesses have done little or nothing to prepare. “The opportunities and obligations for employees and employers will both increase in 2014 and small businesses need to start now to educate themselves and their employees for the near future,” according to Stephanie Altman, Programs and Policy Director at Health & Disability Advocates, a Chicago-based health policy and advocacy organization.
Tom Otto, economic development planner for the West Humboldt Park Development Council, says, “If these were normal times, people would be more interested. But given the economy, there’s just a lot more hovering around them that they have to be concerned about.”
At the Near West Side Chamber of Commerce, executive director Mike Quinlan constantly focuses on such tasks as street cleaning, community safety, marketing of businesses, festivals and other special events. He understandably finds it hard to be well informed about health care reform. When asked if his 35 small business members are particularly well versed about the topic, he says, “It’s got me thinking this is something we should bring up . . . In terms of health care reform, it would help to identify expert speakers who can present the message at chamber meetings to our members.”
While these organizations aim to develop business, their lack of health reform expertise is no surprise: at 906 pages, the Affordable Care Act is so detailed it challenges even the most reform-minded advocates to be fully informed.
We asked Laura Minzer, executive director of the Illinois Chamber of Commerce Healthcare Council, how health care reform will impact South and West Side small businesses. She also weighed in on where small businesses could get information about ways health care reform affects them.
One of health reform’s impacts on the smallest businesses, those of 25 or fewer employees, comes in the beneficial form of a tax credit, Minzer says. To claim the credit, small businesses must employ 25 or fewer full-time employees, those working 30 hours a week or more. To qualify, the employees must be earning average annual wages below $50,000, and the employer has to pay at least 50 percent of the premium. In return, the business owner gets a tax credit of 35 percent of premiums paid, provided as a non-refundable general business tax credit. The 35 percent ceiling will apply to those businesses of 10 or fewer employees. The percentage will decline as the number of employees increases to 25, Minzer reports.
It is employers of 25 or fewer who struggle the most providing health care coverage to their employees, she adds. If they do provide coverage, they often endure the highest rate increases, sometimes up to 20 or 30 percent a year. “All it takes is one catastrophic event in, for instance, a population of 15, to have huge premium rate increases,” she says. “And, as a result, small business employers tend to drop coverage because they can’t afford it.”
Starting with tax year 2014, when an insurance exchange is established, the tax credit for small employers goes up to 50 percent. But coverage must be purchased though the health insurance exchange. The Small Business Majority – a national nonprofit founded and run by small business owners— estimates that almost 160,000 small businesses in Illinois are eligible for the tax credit. “Anecdotally, we’ve heard the number of businesses participating is highly limited,” Minzer says. “It’s a very small number. The biggest challenge in accessing the credit is the coverage amount you’re required to maintain. The tough part for employers is paying half those premiums.”
The ongoing debate about health care reform has caused small business owners to hesitate. “There are worries that if the tax credit provision is pulled, or rolled into something else, employers would have to return to the status quo,” Minzer reports. Employers of more than 50 need to be aware of the changes ahead, Minzer says. Starting on January 1, 2014, those employers who don’t offer health care coverage will be subject to a penalty of $3,000 per employee. (See a helpful flowchart here on this provision). If they do offer coverage and it’s not considered adequate (for example, if employees are paying more than 9.5 percent of their salaries for coverage, it is considered inadequate), employers also may be subject to penalties.
With the crucial January 1, 2014 start date looming ever closer, a big issue for employers will be whether they have 50 full-time employees or not. “Employers hovering around that threshold, or above it, should be paying attention to that. It will become much more of an issue in 2012 and certainly 2013.” The calculations are complex “and there are a lot of navigational issues in play,” she adds.
Keeping Small Business Informed
One key to the eventual success of health care reform will be clear and effective dissemination of information to small business. That’s an extremely challenging task, says Grace Budrys, DePaul University professor of sociology, and author of four books, among them Our Unsystematic Health Care System, whose third edition includes chapters focused on health care reform.
She indicates small businesses are pleased they will get relief through tax credits. “But the problem is that information is so complicated that the majority of Americans, including businesspeople, say they don’t understand it,” Budrys says. “If you look at details in the polls, where Americans are getting their information is often an indication as to how accurate that information is.”
Essentially, to be heard and understood, those communicating with small businesses should be trusted sources of information familiar enough with individual businesses to counsel them on their obligations. Currently, law firms, employer benefits groups, insurance brokers and agents all release enormous amounts of information about reform. The federal government has also been involved, distributing information on reform basics at its healthcare.gov website. Non profit groups, such as the Kaiser Family Foundation, also provide trusted information and facts. “But even the boiled-down version is complicated,” Minzer says. “I personally believe the education piece of this is going to make it or break it. And it’s the heaviest lift of all.”
Educating small business people, who vary widely in education, background, country of origin, English language skills and experience with insurance will require enormous coordination of stakeholders, Minzer says. “There’s that constant battle of trying to re-educate the public in terms of the expectations versus the reality,” she says. “Especially when you talk about a population who will have access to coverage in 2014 who may never before have had access to coverage, how do you speak to all the demographics, all the divergent groups? And how do you make sure they demand quality care and services?”
Trusted Sources of Information
The following stakeholders will have to assist owners in understanding the new regulations and how those provisions apply to their businesses.
Insurance brokers. Employers often have very good relationships with their current insurance brokers. Those brokers have likely frequently given small business owner sound advice on insurance. In many cases with very small businesses, the broker has acted as an ad hoc human resources manager for the business, Minzer says. As such, the broker knows and understands the unique characteristics and challenges faced by the business, has its trust, and is likely to be a valuable advisor on matters of heath reform.
Tax professionals. As much as small business people trust their insurance brokers, they may have even better relationships with their tax advisors. CPAs who have served the company for some time are likely to really know that company and also provide the most up-to-date information. “The tax professional as a provider of information is extremely viable,” Minzer says. “There are a lot of tax issues involved. When it comes to benefits, they can’t answer everything on that side. When it comes to reporting their W-2 form, which is voluntary this year and for employers of 200 or less extended into next year, the tax advisor can be of tremendous assistance. “They can even be of assistance in helping the employer determine whether the business fits within that 50-full-time-employee-or-above threshold.”
West Humboldt Park’s Otto is in full agreement. “The best person to get the information out to them is the person who prepares their taxes,” he says. “They have a much better understanding of details and minutia of the law than virtually anyone else. If we [at the development corporation] were to put the information out there, we may be trusted, but we don’t possess the level of expertise, and would probably not be able to answer questions that come up.”
Local chambers and development corporations. Many, however, believe effectively distributing information depends on chambers of commerce and development corporations working at the local or even neighborhood level. “Small business owners spend so much time running their businesses, they don’t have much time for anything else,” says Jake Cowan, business manager with LISC MetroEdge, a commercial development consulting program working with chambers and development corporations to develop strategic plans for business corridors, among them many West and South Side corridors. “It’s really the chambers and development corporations that go into the stores and businesses. The best way to provide information is through local chambers…You need these types of organizations in the neighborhoods, that have spent years building relationships with business owners, who have the trust of those owners and can provide information about federal programs.”
Pikofsky, of New Age Chicago Furniture, is fully on-board with the idea of local business organizations providing insights owners like himself will need. “It would be helpful if Quad Communities Development Corporation provided information,” he says, referring to the development corporation active in his area. “QCDC provides a great function in our community…This type of organization can offer information, assistance, seminars, anything like that, that would be communicated with the businesses of the retail corridor.”
City and state chambers of commerce. Because larger chambers in particular tend to include as members tax professionals, insurance brokers and others involved in this issue, employers should also look to these organizations. “We do a webinar series with law firms specializing in tax and employment law, the human resource side, tax advisors and brokers,” Minzer says. All the webinars are open to members of the Illinois Chamber of Commerce, and some to non-members. “It comes down to trying to build partnerships. The best way for local chambers to provide a one-stop resource is to tap members within their own organizations. Those employers without close relationships with tax advisors or brokers can turn to their local chambers or local development groups. It’s also a good way for the members who can provide that information to get their name out there. So there’s a business rationale for them to participate.”
Grassroots and community organizations. Budrys sees non-profit organizations and churches stepping up to deliver some of the information. For example, Campaign for Better Health Care – a statewide grassroots advocacy organization — has partnered with the Small Business Majority to provide information and a webinar series on the impact of health care reform for small businesses in Illinois. One means of accessing information that’s probably not recommended is simply searching for it haphazardly on Internet search sites.Though a number of websites, such as IllinoisHealthMatters.org, are legitimate and helpful, many others disseminate suspect information, leaving consumers wondering which sites to trust. “When change occurs, and the ramifications of the change are not clear, that’s when the door is left open for fraud,” Budrys says. “And in every instance, that happens.”
The bottom line for businesses: It’s normal to hesitate and be wary.
But small businesspeople on Chicago’s West and South Sides should know even the corporate giants are dealing with this issue, wondering how it will all play out. “It’s easy for us to say employers need to stay engaged,” Minzer says. “That’s easier said than done. But it’s very important for them to ask questions, and not be afraid of the unknown.”
Story by Jeffrey Steele, firstname.lastname@example.org
Jeffrey Steele is an independent writer in Chicago who has researched and written more than 2,500 articles appearing in such publications as the Baltimore Sun, Barron’s, Boston Globe, Chicago Sun-Times, Chicago Tribune, Los Angeles Times, New York Newsday and others.
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Illinois Health Matters presented accessible, personal stories about how health care reform is impacting underserved communities on the South and West sides of Chicago. These stories were part of the Local Reporting Initiative, supported in part by The Chicago Community Trust.