Christian retailers anticipate impact of Obamacare rules and regulations

As the controversial Patient Protection and Affordable Care Act goes into effect Jan. 1, 2014, Christian Retailing spoke with some key Christian retail store owners and managers to find out what they were doing to prepare for the impact of Obamacare regulations.

Under the law, all U.S. citizens are required to have health insurance, either through their employer or by purchasing it directly from the government. People who don’t have it by 2016 face a penalty amounting to either 2.5% of a person’s taxable income or approximately $2,000 per family, depending on their income.

Open enrollment begins Oct. 1 and businesses with 50 or more “full-time” employees (working more than 30 hours per week) must offer health benefits to staffers by Jan. 1, 2014, or pay a $2,000 per-worker penalty. 

In response, many business owners across the nation have cut hours to give employees only part-time status or have stopped hiring until they get a chance to see what kind of impact the law will have on their businesses.

To find out more about what Christian retailers are doing in response to the law and more, we spoke with Sue Smith, manager of Baker Book House in Grand Rapids, Mich., and the incoming chair of the CBA board; Chuck Wallington, president of Christian Supply in Spartanburg, S.C., and head of Covenant Group; and Gerald Hicks, owner and manager of Perfect Peace Christian & Education, an independent store in Wichita, Kan.

CHRISTIAN RETAILING: What impact will the Affordable Care Act and other new federal regulations have on your store and Christian retailers in general?

Smith: I don’t think we really quite know how it’s going to impact us yet. It’s still a day-to-day thing. As the new regulations come out and we learn about them, we just try and analyze them and do the best we can for our stores. I just don’t think we know enough yet to answer that really intelligently. 

Wallington: I think in general it’s going to have the same effect as any huge tax hike and it’s going to be devastating. It’s a tax hike en masse. It’s a huge tax on American businesses, especially large businesses. It will raise insurance premiums. It will lead to raising prices or cutting profits, depending upon how much the business is willing to absorb, and I think it’s going to be devastating to American businesses. 

Smith: We just don’t know how bad it’s going to be yet. I think there is a lot of fear out there. 

Wallington: You saw a lot of fear when the whole financial cliff thing came up about sequestration and all that, and it was definitely felt at our cash registers. Everybody was focused on that. All the media did was talk about it. I think this is going to have just as negative of an effect—maybe more. It’s here to stay. Anytime you nationalize something and the federal government gets involved, they screw it up, costs go up, and when costs go up, somebody has to pay for it.

Smith: Any time our customers feel insecure about the future financially we feel a direct hit at the cash register—whether it’s talk of war or recession. Anything, like Chuck said, it really hurts us, and we see a definite decrease. People just get nervous about what they are spending. 

Wallington: They think about how they are going to pay for things. Costs are going to go up. You know they are, and we’re in an industry that relies totally on discretionary income. And when costs go up in some areas, discretionary spending goes down. 

Hicks: So far, I’ve not been affected, but I’m fearful that it’s going to impact us in a big way. Our health insurance renewal takes place on March 1 every year. It’s always right at the end of the year that I get my renewal packet that tells me it is open enrollment from January to March. It also has my new rates in there, and I was just extremely worried about opening that this year—afraid of what the impact was going to be because we’re in a position where we’re maxed out on expenses in terms of health insurance costs. If those continue to go up, I’m going to have to make some changes—some big changes in what we can afford to do. Fortunately, for whatever reason, my rates basically stayed the same in 2012 and for my renewal in 2013. Again, while I’m thankful for that and feel like I got a year reprieve, I’m still nervous about what is going to happen next year after everything is fully implemented.

CR: How do you think the Christian retailing industry is doing now—and how do you expect that to change as these regulations go into effect? 

Smith: Right now, the industry is struggling from all aspects. I think it’s going to be an uphill battle with the regulations going into effect with Obamacare. 

Wallington: I’d agree with those statements. I think the industry is struggling and I’d say it’s weak right now. We are putting a lot of extra reporting costs, as well as in the case of some larger employers in the industry, some additional mandates on them that are going to add costs. I don’t think our industry is healthy enough right now to assume a lot of additional costs.

Hicks: Quite honestly, I don’t really have a good feel. At this point in time, it’s not a topic I’ve talked about with other stores.

CR: How is your store preparing for implementation of these new business regulations, including Obamacare? What steps is your store taking?

Smith: We are just continuing to watch the new regulations as they come out and prepare to do the best we can for the good of our employees. We want to do the best we can for our employees and our customers. 

Wallington: The biggest single thing we’ve done is we’ve made a concerted effort over the last 18 months to get below that 50-employee, full-time-equivalent threshold. We’re there and have been since January of this year. I don’t know if a lot of people are aware, if you’re above that threshold in January of 2013 and you’re below it in January 2014, you still are subject to the mandate. The government looks back a year. So those planning on reducing their staff in December are going to be too late. But we’re below 50 full-time-equivalents for the first time in probably 20 years, and it’s a direct result of Obamacare. 

Hicks: This could be a major disruption for my staff. There are so many unknowns. If we have to drop it [health insurance], or if we can’t afford to cover it, then what do you do? I don’t know. We don’t have a highly paid staff, but yet they are probably in a situation where maybe, as a household, they are going to be deemed to make more money than what is required for them to get government insurance—as far as subsidies. The staff that need health insurance and are eligible have it now. It’s a cornerstone of the benefits we have now. It’s going to be a major disruption if we have to drop it. I have 20 staff people altogether, including my wife and I, and I only have five actually on insurance. I don’t have a whole lot of full-time staff, and even some of my full-time staff are covered under their spouse’s policies, so they don’t necessarily take it out, although they qualify for it. The only reason I’d drop health insurance coverage is if it gets too expensive and I can’t afford it from a business standpoint. I’m not looking to cut people’s hours back or looking to drop health coverage and throw people into a situation where they have to find it elsewhere. I’m trying to avoid that scenario. 

CR: Do you plan to cut staff or hours at your store in light of the health care changes? 

Wallington: We already have. [As I mentioned,] if you didn’t do it by January of this year, you are actually too late. We have definitely cut staff and hours to get below that threshold. We’ll stay below that threshold if we have to hire consultants, but we won’t go above the 50 full-time-equivalents for a number of political, economic and moral reasons. Politically, I don’t trust the government to run my health care. Financially, I can’t afford for the government to run health care for my store, and morally I can’t afford to subscribe to what the government requires if they run health care for my store. 

Smith: It’s a little different here [because of Baker Publishing Group]. … So all of those mandates are encompassed in a publishing house and a bookstore total. So I don’t know the answer to that. You’d have to talk to our HR [Human Resources] director. Here at the store, that is true. If you’re considering just the store, yes, we have cut back staff—especially full-time.

Hicks: I’m not planning to do that as a result of health care costs. I’m not trying to plan ahead and say, since this is coming down the pike, we’re going to cut back on hours. I’m not doing that. I will only cut back staff to the extent I have to keep our business expenses in line. The only thing that will dictate that is what the future costs are going to be for me in terms of health insurance. I’m not cutting back staff just because Obamacare is being enacted. I’m a small-enough employer, a mom-and-pop type of business that I’m under the 50-head mandate.

CR: Does your store plan to continue providing health insurance? 

Smith: Oh, definitely. 

Wallington: Yes, we’ll continue to provide it as we have for probably 45 years now, but we’re doing anything we can so that we won’t be impacted by the government regulations.

CR: Do you plan to hire anyone full-time in the future, or have you hired anyone in the last two years?

Smith: Yes, we do [plan to hire full-time employees]. I have lost three full-timers and am going to replace one of them this coming year.

Wallington: It’s the same situation. We’ve had full-time people leave and we replaced some of those. We hired people in a different area that were full-time, but we didn’t replace the person who left in the same area due to the changing needs of the business. But overall, we have dropped full-time employees. 

Hicks: I hired a person full-time two weeks ago to replace someone else. I’m not hiring additional staff. The only people that are coming on board new are to replace someone who is leaving. Over the two years or longer, we have been slowly cutting staff, not adding staff.

CR: When it comes to hiring, retailers can’t ask whether a potential employee is a Christian, but what kind of questions do you ask?

Smith: We cannot ask them if they are Christian, but we can ask them leading questions that tell us about their faith in a personal way, and 98% of the time the people I’m interviewing know that’s what I’m looking for so they volunteer it. 

Wallington: Our questionnaire has some questions on it to help us determine if that person has much spiritual interest. We have them list their favorite authors, their favorite artists or any Sunday school curriculum they are familiar with. All of those lead us to find out whether or not they have a background in their local church or whether they read Christian literature, so you can tell a lot from people’s interests in those areas. And if you ask them for references, and if they are a member of a church, they will usually give you a pastor as a reference.

Smith: We also ask people to go out onto the floor and pick up two of the latest books they’ve read, bring them back and tell us about them.

Hicks: We ask a lot of typical questions. I have an application that asks them about their educational background, what their favorite subjects in school were, about past employers, what their hobbies and interests are, their references and what their skills are in terms of computers and customer service, doing inventory and those sorts of things. I know there were some issues in California about this. Usually, it’s not a big deal for us because, obviously, if someone brings up that, “Well, I go to church or help in a church ministry,” when they bring up those types of things in an interview, then asking what church they attend becomes a legitimate question. A lot of times people coming in for an interview will volunteer that kind of information. I don’t come out and ask them about their faith or if they attend church. They are generally happy to share that information with me. 

CR: If you were to train someone starting a new store, what would you recommend in setting up payroll?

Smith: I think most CBA stores can’t afford to have a service, but I think I would do it myself. 

Wallington: We do it ourselves just because it’s built into our computer software.

Smith: It’s easy enough for most CBA stores to do it themselves.

Hicks: If it’s small enough, they might be inclined to want to tackle that for themselves. If it’s five people or more, I would definitely recommend they get a payroll service to provide that for them because then they can put the burden on the payroll service to make sure they are filling out the proper paperwork. 

CR: Has your store ever had to deal with a workers’ compensation case, and what did you learn in the process?

Smith: Yes, several times. It’s a long, exhausting process. It’s a lot of paperwork and a lot of working with caseworkers, but it’s well worth it, especially for a good employee. In terms of advice, take great notes. The minute there is an accident in your store, make sure you are taking great notes of what happened. Obviously, copy everything and keep the notes in a file. 

Wallington: Usually, the workers’ compensation insurance provider does most of the paperwork. We just have to respond to what they ask for.

Hicks: I’ve a couple of issues, minor injuries, where we just paid for out of pocket. I think I only had one case where they actually filed through workers’ compensation. Everything else has been very minor. But I know it can get very expensive so we try to do as best we can to prevent those things from happening. It’s usually an unfortunate incident or something we can take care of ourselves.

CR: With regard to new regulations, how does being part of CBA or a marketing group help?

Smith: Being part of CBA definitely gives us someone to go to to ask where I can get this information if I don’t have it. 

Wallington: A trade association provides those kinds of services, lobbies for things and offers some expertise in areas that an individual store may not have or want to pay for.

Hicks: Obviously, it may beneficial if there was some way to get health insurance through CBA perhaps. I don’t know if through CBA we could get a group policy enacted. I wish we could do that. I don’t know what it would take on CBA’s part to make something like that happen, or even if it’s feasible. It would be nice if we could form a health insurance group that includes Christian retailers.

CR: As Christian retailers throughout the country prepare for Obamacare and other new regulations, what advice would you offer?

Smith: I would say, call on your HR director, if you have one. A lot of stores don’t have an HR director. If you don’t have one, be sure that you are keeping up—reading everything you can and being as informed and educated as possible. I think that’s probably on the top of the list.

Wallington: I’d say having good health insurance broker—somebody who can answer a lot of your questions for you and help you navigate the waters in that industry. The biggest thing is I don’t think a lot of people know what exactly Obamacare is going to do. You’ve got to stay a step ahead—and find every loophole you can. 

Hicks: I think it would be great if the CBA could put something together in terms of a health insurance buying group. That would be beneficial to us.

Wallington: From our standpoint, we’ll continue to be involved as a small business to be involved in every effort to get it repealed. I don’t hold out a whole lot of hope, but we’ll make our best shot.