Costs May Force Fleets to Cut Health Coverage

Some trucking companies may stop offering health insurance plans as President Obama’s health-care overhaul takes effect, some experts said, citing the increasing costs of insurance compared with the penalty for not offering plans.

Under the Patient Protection and Affordable Care Act, most employers will have to pay a $2,000 annual penalty per employee if they don’t offer insurance, but that’s likely to be thousands of dollars cheaper than health plans for trucking companies.

“They think that, ultimately, that would be cheaper for them than actually proceeding,” Brigham McCown, a transportation consultant, told Transport Topics, “and it’s a lower regulatory burden to just pay the fine and be out of the system.”

McCown was the first chief counsel of the Federal Motor Carrier Safety Administration in 2001, then led the Pipeline and Hazardous Materials Safety Administration when it was formed in 2004. He left the federal government in 2007.

“I’ve heard from a number of larger carriers who said they are seriously considering whether or not to pay the fines in order to not offer the coverage,” McCown said.

The U.S. Supreme Court ruled June 28 that the Affordable Care Act could be enforced because it does not violate the U.S. Constitution. The National Federation of Independent Business, along with 26 states, argued that Congress overstepped its power to regulate interstate commerce when it passed the law in 2010.

In a 5-4 decision, the justices ruled that the individual mandate, the central piece of the law that requires most individuals to have health insurance by 2017, qualifies as a tax and is therefore constitutional under Congress’s power to impose taxes.

The court ruled that the law did violate the commerce clause of the Constitution, but that did not matter because the taxing power makes it constitutional.

Starting in 2014, the law will require that businesses with more than 50 employees provide subsidized health insurance or face the penalties.

The U.S. Chamber of Commerce agreed with McCown’s argument that many businesses would choose the penalties if they are lower than health insurance costs.

“I think that a lot of people are going to be doing that math,” said Katie Mahoney, executive director of health policy at the business group, which has opposed the Affordable Care Act for years.

The Chamber of Commerce has not estimated how many employers would choose the penalty, but based on the number of individuals who would choose to pay a penalty instead of complying with the individual mandate, Mahoney predicted that many employers would take that step.

“The expectation is that 4 million individuals will decide to pay the tax instead of purchasing health insurance,” she said, citing an estimate from the Congressional Budget Office. “I think employers are similarly going to evaluate that option . . . I think it will depend on the industry.”

Trucking companies especially would be likely to choose the penalty route be-cause certain health issues are common in truck drivers, making insurance coverage more expensive for them, McCown said.

“You have more pronounced health-care issues with truckers because of the sedentary lifestyle they lead,” he said. “We’re not the healthiest in-dustry; let’s face it.”

As insurance premiums rise, reaching close to $8,000 per employee for some carriers, the $2,000 penalty becomes more and more attractive, McCown said.

Those employees would be eligible to buy insurance in the insurance exchanges each state must establish by 2014, he said. The exchanges will allow individuals who cannot get insurance otherwise to compare and buy affordable private plans that meet certain requirements, and possibly be eligible for government subsidies to do so.

“My suspicion is that premiums are higher in the trucking industry because the health-care risk is elevated,” McCown said. “And so, that’s one reason why trucking companies, more than others, may be willing to pay the penalty.”

Trucking companies also might be more likely to use part-time employees as a result of the Affordable Care Act, Mahoney said.

Federal officials will determine whether an employer must offer insurance by calculating the number of full-time equivalent positions, which includes part-time employees by how many hours they work. But the penalties for not offering insurance are based strictly on the number of full-time employees, she said.

“So there is this perverse schema in the law where you could have 1,000 part-time employees and not be penalized for not offering coverage,” she said. This could encourage some industries to replace full-time employees with part-time ones.