Health care reform could mean bigger bills for small business

FORT WAYNE, Ind. (WANE) - The CEO of Aptera, a small business in Fort Wayne, said he expects his costs to provide health care benefits to his employees will go up by more than $80,000 when the health care reform take effect in 2014.

Thursday, the Supreme Court upheld the law as constitutional. Some experts said they expect premiums to go up for most people. Friday, Aptera said it's also expecting bigger bills.

"The check we write every month to the health insurance company is the largest check we write every  month outside of payroll," TK Herman, Aptera's co-founder and CEO, said.

The company's grown quickly, adding 26 new jobs just last year. It now has 60 employees, 40 of whom get insurance through the packages offered.

"We've changed how we offer insurance [since the health care reform law as passed two years ago]. We have multiple plans, so a high deductible plan and a standard plan to give more choices to help drive the cost down," Herman said.

Aptera pays for 85 percent of the employees' premiums and the employees cover the cost of any dependents coverage. That will change in 2014.

"The mandate says businesses have to pay 65 percent of the dependent costs," Herman said.

If the change were to happen right now, that would be around $78,000 of added costs on top of what it already pays to provide health coverage. Herman said it will probably be more than that by 2014 because the cost of providing insurance goes up about 25 percent every year.

The law change requires companies to pay for at least 72.5 percent of employee's premiums. That's less than what Aptera already pays.

"Do I cut that down to help offset the other 65 percent for families," Herman said, saying that wouldn't be fair to the single employees.

Herman hasn't decided how the company will change what insurance it offers, but he admits it would be a lot less expensive to just drop the coverage and pay the penalty. With 60 employees, the fine for not providing medical benefits would be around $60,000 a year.

"Could we opt out and pay the penalty? Yes. But, how does that hurt us from the recruiting stand point," Herman said. "As a business, we have to look at all the options, but that's a slippery slope when we're competing for jobs."

That tough choice creates another difficult decision for a small business.

"Politicians say they want to create jobs and grow the economy, but then they are pushing extra costs on employers who create those jobs. As a company, you have to pick one or the other," Herman said. "That comes right out the profit. That's less money as a business that you can invest back in to the company to grow the company."

Companies with fewer than 50 employees aren't required to provide health care benefits and won't be penalized if they don't. Herman said that could keep some companies from expanding.

"It's another slippery slope," he said. "You don't want businesses thinking that way. You want them thinking about growing and growing jobs, not that if I hit 50 people I'll be penalized. So, I might not go past that point."

Still, while it will be more difficult, Herman said he's committed to growing Aptera.

"It's a big burden, but we'll still drive forward. We have 60 employees today, we want 100. When we have 100, we want to be 150," he said.

Watch one of the videos in this story to hear Herman talk more about how health care reform will affect his small business.

On Monday, NewsChannel 15 will talk with a private insurance company about how it could be affected by the reform.