WASHINGTON — Left in the wake of the U.S. Supreme Court’s recent decision to uphold the Patient Protection and Affordable Care Act (ACA) are legions of installing security contractors and other business owners wondering how the new provisions may impact their bottom lines.
Set to take effect Jan. 1, 2014, among the law’s most contentious provisions is a mandate that will require employers with more than 50 full-time workers to offer health-insurance coverage or pay fines ranging from $2,000 to $3,000 per employee per year. No business is required to provide insurance, but in 2014, only the smallest firms will be exempt from penalties if they don’t.
“Here are two words to consider about the law: unintended consequences,” says Mike Miller, president of Pasco, Wash.-based Moon Security. “There very well could be a domino effect throughout the entire company.”
Miller, a past president of the Electronic Security Association (ESA) and a member of SSI’s Editorial Advisory Board, presents a stark picture when discussing the tough decisions he and other security operators will have to make if the law takes effect in its current form. For Moon Security, which offers health insurance to about half of its 160 employees, that could even mean selling off a portion of the company.
Moon Security operates multiple units, including a central station, installation and service departments, house arrest monitoring, admin, plus a guard and patrol division with about 80 employees who are not currently offered a health-care plan. Extending coverage to the guard/patrol unit, Moon’s longest-operating division, would prove extremely costly, Miller says.
“Right now for individuals to be in our program it’s about $400 per employee. I am looking at 80 people at $400 per month, so that conservatively is another $32,000 monthly. That is a huge impact,” he says. “Every day I have to get cash flow to be able to meet my weekly payroll. When we talk about adding a $32,000 a month increase, I have to come up with an additional $8,000 a week to be able to handle that kind of cash flow.”
Miller is frank about his options to mitigate the potential outlay. “We’re not making that kind of money. I will have to make a decision. Do I sell that division? Do I pass the costs onto the customer and increase hourly rates? Do I fix wage rates and the employees won’t have any increases for the next three years while I ascertain all the costs? There is no easy out.”
With the clock ticking for the ACA to be implemented, many security companies are already being negatively affected by the law beyond having to figure out how to prepare for it internally, says Bob Bonifas, CEO of Alarm Detection Systems (ADS), headquartered in Aurora, Ill. For example, with so much uncertainty surrounding the law and whether or not it could still be revised or even repealed depending on the outcome of the November elections, a great many businesses have put expenditures on hold.
“A lot of our business is stagnant. We have bids out everywhere. Our bidding volume is as good as it has ever been, but we are sitting with almost $10 million of unsold business,” Bonifas explains. “Nobody [end-user customers] is moving. They are all scared to death of what this law is going to do to them when the other shoe finally drops. It all hinges on the election in November.”
A majority of independent security companies won’t be directly affected by the law given that many of the provisions only pertain to companies with 50 or more employees, says Mitch Reitman, managing principal of Fort Worth, Texas-based SIC Consulting, which provides financial services to security alarm companies.
It is important for business owners to be aware of the law and its provisions, but it is safe to take a “wait and see” approach until the political winds are determined by the November elections, Reitman says.
“The good news is that 2012 is an election year and the [ACA] was not well negotiated. If there is a lot of change in the executive and legislative branch, I expect that the Act will be heavily modified in the next Congressional session,” he says. “I don’t expect outright appeal, but I don’t believe that it will survive in its present form.”