Healthcare bill ails growers
Legislation could be ‘economically devastating’ to agriculture
Countless details still must be worked out in the healthcare reform bill President Barack Obama signed into law in March. But that hasn’t stopped the agriculture industry from expressing apprehension about the landmark legislation.
Overall, its effects are in the eyes of the beholder, says Walter Kates, vice president of labor relations for the Maitland-based Florida Fruit & Vegetable Association.
“But for agriculture, it could be economically devastating,” he says.
Starting Jan. 1, 2014, the law requires employers to pay at least 60 percent of the premiums to provide full-time employees with “minimum necessary coverage” for healthcare.
Employers with 50 or fewer employees are exempt, and the requirement would not apply to part-time or seasonal workers.
Part-time workers are those who work less than 30 hours per week during any given month, and seasonal workers are those who work more than 120 days per year, says Cathy Enright, vice president of federal government affairs at the Washington, D.C., office of Irvine, Calif.-based Western Growers.
No getting around it
You won’t be able to avoid the law by cutting back hours of full-time workers and classifying them as part-timers.
“The bill says you have to aggregate all your part-time worker hours over the course of a month and divide it by 120,” Enright says. You then add that number to your full-time employee count.
If you do not offer insurance, and any of your full-time employees receives a government subsidy to purchase insurance, your penalty is $2,000 per year multiplied by each full-time employee. You can subtract the first 30 employees.
Growers will have to decide whether it’s cheaper to offer the coverage or to pay the penalty, Enright says.
“That’s a decision employers are going to have to make,” Enright says. “We don’t know yet what the cost of the insurance is going to be.”
Even employers who offer a qualified health insurance plan can be fined if they don’t pay at least 60 percent of the premiums or if the premiums would cost an employee more than 9.8 percent of household income.
The requirements apply only to legal U.S. residents and only to employees, not their children or spouses.
If you secure workers through a farm labor contractor, the contractor will be responsible for meeting the healthcare requirements, Enright says. But that cost likely will be passed on to farmer clients.
That could be bad news for growers who are not required to provide healthcare but who source labor through a contractor. They could be absorbing a cost that the law did not intend for them to pay, she says.
As part of the legislation, if you’re a qualified small employer (with 25 employees or fewer) who offers healthcare coverage to your employees, you may be eligible for federal tax credits.
Big employers to feel brunt
The legislation likely will have the most impact in states, such as Florida and California, which have many large employers.
Most large agricultural operations in Florida use workers for eight or nine months each year, says Kates of the Florida Fruit & Vegetable Association. So the exemption for seasonal workers employed for 120 days or less won’t apply.
Some employers might cut back on the number of workers they hire, or the law could be an incentive not to expand, he says.
It also would be an incentive for growers to seek out independent labor contractors who hire fewer than 50 workers and would be exempt from the requirements.
Or large growers may consider dividing their company into several different corporations, responsible for various aspects of the operations, such as management, harvesting or production, Kates says.
“All kinds of things will be looked at,” he says.
The new healthcare bill might end up causing some growers to cancel existing arrangements they have to provide at least some health benefits to their employees, says Bryan Little, director for labor affairs for the Sacramento-based California Farm Bureau Federation.
“That is the thing that kind of concerns me,” he says.
Like Kates, he says employers probably will try to do anything they can under the law to avoid the ramifications that will cost a lot of money.
They’ll make choices “not to grow or not to do certain things in order to avoid hitting some of these thresholds,” Little says. “Any smart manager or entrepreneur is going to do that.”
Employer members of Yakima Valley Growers-Shippers Association in Yakima, Wash., care about their employees, says executive director Jon DeVaney.
“But they don’t necessarily have the resources to make everything that might be desirable in the way of benefits available to every employee,” he says.
The cost of labor is “substantially higher than many of our foreign competitors,” DeVaney says. But he does not expect to see growers sit back and allow their prices to become noncompetitive.
“There’s going to be added attention to labor-saving technology as a result of this,” he says. “The higher the cost of labor, the more attractive labor-saving technology will become.”
Tremendous impact
There’s no doubt where grower Tony DiMare, vice president of the DiMare Co., Homestead, Fla., stands on the healthcare bill.
“The potential economic impact is tremendous,” he says. “Agriculture is completely different from most other industries because of the seasonality. These workers truly move around, sometimes on a regular basis—sometimes day to day or week to week.”
The DiMare Co. already offers health insurance to its full-time workers, he says. But to offer it to seasonal workers would “cost a fortune.”
The minimum wage, workers compensation fees and costs of every input needed to produce the company’s tomatoes have skyrocketed over the past five years, he says, raising the cost of production to $8,000 per acre from $5,000.
“I don’t think anybody really looked at our industry and the impact [of the legislation],” he says.
“Seasonal ag was ignored by the congressional leadership in drafting the bill,” agrees Western Growers’ Enright. “Legislators no longer understand the significance of ag. Our needs were considered too much in the weeds.”
Some growers might have to hire a full-time human resources employee just to keep track of hours, days worked and to comply with various details of the plan.
“That in and of itself is an economic burden,” she says.
Western Growers and other agricultural trade groups will continue to monitor congress as senators and representatives fine-tune the legislation, and Enright says she remains optimistic.
“I have full confidence that we will work within the regulatory process to make this workable for our employers,” she says.
Contact The Grower at vlboyd@att.net or (209) 571-0414.
