I attended the Manufacturing Summit for the American Home Furnishings Alliance in Greensboro, North Carolina on August 22nd. The agenda was centered on helping companies deal effectively with the huge number of regulations in place now, as well as the onslaught of those coming into law in the near future.
The whole morning was spent on evaluating the “Affordable Healthcare Act” (AHA) a.k.a. “Obamacare”. The speaker, Greg Stancil, was excellent. He had obviously done his homework on this issue, and yet he avoided injecting any political opinions (I’m not going to be so gracious). His presentation was also engaging. I actually paid attention through its entirety. That’s not to say I didn’t have a headache by the end of it, but that wasn’t his fault. It’s the fault of those who drafted this legislation and put it into law.
Our federal government apparently believes that American businesses have extremely deep pockets and they can absorb an infinite amount of convoluted regulation without having a corporate breakdown. Although the intention of the AHA was obviously not to burden businesses beyond their means, the complete lack of consideration for the concerns of business is obvious. Somehow, the Administration and a large portion of the Legislative Branch, forget that it is business that creates wealth and provides the majority of jobs for everyone: the upper class, the middle class, the poor. Without businesses, our country would not exist.
When regulation disregards the interests of business, how can we expect a real economic recovery? The AHA actually motivates businesses to downsize:
- Businesses with less than twenty five employees receive a premium tax credit
- The employer mandates and regulations primarily target companies with more than 50 full time employees (FTEs). They must provide healthcare coverage for each and every FTE or pay an annual penalty.
- Companies with more than 50 FTEs are also subject to a penalty if even one employee qualifies for and receives a subsidy from the government and the company doesn’t provide a healthcare plan that covers at least 60% of benefit costs or if the benefit cost is not greater than 9.5% of household income. An individual will qualify for a subsidy if his or her total household income falls below 400% of the Federal Poverty Level. The employer is notified of the penalty only after the fact.
It’s beyond the scope of this article as well as beyond my level of understanding to fully explain the details and implications of these regulations. However, to give you an idea of employer burden, many companies are trying to avoid these regulations by breaking down their companies into smaller companies, each with less than 50 FTEs. The government is aware of this strategy and has vowed to investigate and disallow such actions. Does our government know how to stimulate growth or what?
Companies with high profit margins will be able to handle these issues without going out of business. The home furnishings industry is typically not made up of such companies. Already most of the wood furniture manufacturing has gone overseas, where these and other regulations will not be in effect. Obviously, this law is going to drive more manufacturing overseas. By moving manufacturing offshore, many companies can reduce their number of domestic FTEs to 50 or less. If this doesn’t do it, maybe they’ll just move their whole operation overseas.
The Affordable Healthcare Act was ill conceived and pushed through Congress before anyone knew the implications. Now that the implications are coming to light, several components of the law are being delayed by the Administration. These actions are illegal since the Executive Branch of government doesn’t have the power to selectively enforce legislation. Secondly, selective delays are not a solution.
One significant example of a provision that is being delayed is the mandate that employers must report the income of their FTEs to the government for the purpose of determining their eligibility for government subsidies. However, the implementation of the subsidies themselves is not being delayed. The result is that individuals can claim benefits without verification from their employers. The revenue intended to pay for these subsidies was supposed to come at least in part from fines imposed on employers. Without reporting from employers, there can be no such fines. Since this source of revenue will not be available, guess who pays? We taxpayers do, of course! What happens if it’s later determined that the individual was not eligible after all? If he or she is poor, do you think they’ll have the money on hand to repay the government? What a mess!
I appreciate the efforts of the American Home Furnishings Alliance in holding this summit for the purpose of helping manufacturers comply with this and other regulations being imposed on them. Like most associations, the services they provide are worth far more than membership fees or conference registration fees. I strongly encourage support for associations in our industry and suggest you join the association that you feel most strongly represents the specific issues facing your company. The combined resources of these organizations give them the means to address issues far more effectively than any one company can hope to achieve on its own.
The Affordable Healthcare Act is only one of many regulations recently being imposed on businesses. Government must regulate certain activities for the good of society. At the same time, it must consider the needs of all parties in a fair and equitable manner. Otherwise, these regulations can do more harm than good.