Warren Meyer

Warren Meyer, Contributor

I write about business, economics, and climate change

10/18/2011 @ 10:53AM |1,312 views

Regime Uncertainty and Obamacare

This weekend, something odd happened as I was preparing my company’s bid for a new 10-year contract.  I am accustomed to having to make estimates of expenses and revenues under uncertainty, but for the first time, starting in 2014, I had absolutely no idea how to calculate my labor costs.  How can a service company make ten year commitments without any control over its labor costs?

A bit of background is necessary.  My company privately manages the operations of public parks and campgrounds.  When the government runs out of money to keep parks open and well maintained, it is generally because their costs are really, really high.  Companies like ours are able to operate and maintain many public parks using just the user fees that are already paid at the gate, without taxpayer subsidies.  In preparing a proposal for a new park, we estimate our costs for running a park (a very labor intensive proposition), compare that to the revenues from the park, and bid a certain amount of rent we will pay each year as a fee for the rights to operate the park.  Contracts are from 5-30 years long.

As you can imagine, we have a pretty good database of how much a variety of outdoor activities, from cleaning the bathrooms to providing liability insurance, costs.  And government-imposed costs are part of this equation.  Typically we have to research local sales and lodging taxes, occupancy license fees, property tax rates, workers comp insurance rates, unemployment insurance premiums, etc.

Our company does not provide health insurance, because our workers, even our most senior managers, only work for us seasonally (ie a few months of the year) and many work part-time.  Beyond this, the vast majority of our 450 peak season employees are over 65 and on either Medicaid or some other retirement health plan, and so there has never even been any demand for such a plan.

But in 2014, most of the employer mandate and penalty provisions of the PPACA, aka Obamacare, take effect.  I have read large, mind-numbing swaths of the 2000-page legislation itself.  I have read any number of bulletins and guides from law firms and consultants.  I keep up with breaking news on its implementation, particularly form the indispensable NFIB.  And still I have absolutely no clue what will be required of us.

A number of smart folks on the Left, who have never and would likely never do something so crass as actually participate in a productive enterprise, have argued that complaints about regime uncertainty by business people is all so much whining.  The problem, they argue (not without some truth) is with demand — if business people were being presented with profitable market growth, they would invest to capture it, irregardless of the President’s personal disdain for business people.

And yes, given that scenario, they would likely invest.  But would they hire?

Already, the true cost of an employee dwarfs what is on his or her paycheck.  Bad employees are increasingly difficult to hire, as employees immediately run to the eager, waiting arms of an attorney when they are fired for cause.  But if one doesn’t fire a bad employee quickly, he or she is a walking liability time bomb, with my company liable for any boneheaded action an employee might engage in.    With rising minimum wages, family and medical leave laws, an increasing number of protected groups who will sue over any bad outcome — is it any wonder we have jobless recoveries?

But beyond all this mess, which is the water in which small business people swim, the PPACA stands alone as a particularly large barrier to hiring.  Let me take you through my thought process in trying to wrap my arms around the PPACA requirements.

We are bidding on a contract to keep five large parks and campgrounds open in Kentucky, in an operation that at its peak in the summer might employ 75 or so people.

My first thought was to just provide the required health insurance.  After all, most of my employees are on Medicare and will likely not take me up on the offer of health insurance, so maybe it would not be too costly.  So I call up health insurance companies and … they laugh at me.  My employees only work for 5 months a year.  After a typical 2-3 month waiting period in the spring, they would be on a plan for all of 2 months.  No such policy exists (some employers offer limited medical plans to seasonal workers, but these are illegal under the PPACA).  Given the ratio of administrative costs to premiums, its hard to imagine anyone ever offering such a plan under the PPACA rules.

So, the Federal government is requiring our company to buy a product that does not exist, and likely will never exist.  Once I realized this, I accepted the fact that the only way to comply with the PPACA was simply to plan to pay whatever penalty was in the law.  In some ways this was a relief, because the amount of record-keeping involved in providing health insurance under the PPACA, including keeping track of every employee’s medical plan, even if it is not paid for by the company, is staggering.

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