Kelly Gilreath started cleaning offices more than 25 years ago. Now she has a full-fledged janitorial service business with almost 100 people on her payroll in three states. She dreams of expanding her business further, even internationally.
However, she says President Barack Obama’s signature domestic legislation is making it harder for her business to grow.
Kelly’s Professional Cleaning Service, Inc., (KPCS) based in Greenville, S.C., has found itself caught on the edge of Obamacare’s regulations requiring it to provide health insurance to its employees.
The law requires all businesses with over 50 full-time employees to offer qualifying health insurance to their employees and KPCS is close to that cutoff.
Gilreath is hiring only part-time people as much as she can in order to keep her business below 50 full-time people, with “par-time” being under 30 hours per week.
“You have to try to find ways to try to remain a sound company and still meet the law, and that’s hard to do without cutting wages and cutting hours for people,” Gilreath said.
The result of the shift toward more part-time workers is that fewer people will want to work for her business because fewer people will want to work only part time hours, Gilreath said. KPCS will thus have a harder time hiring people, making it harder to grow.
If KPCS went over 50 full-time employees, the federal penalty would be between $2,000 and $3,000 per employee, Gilreath said. But the cost of insurance would be even more: An insurance company offered a plan to KPCS at $900 per month, per employee.
“We can’t do this! There’s no way!” Gilreath said, in response to the potential cost of the law.
President Obama has offered little relief for employers caught in Gilreath’s situation. He chided employers who are balking at providing health insurance to their employees late Tuesday afternoon when discussing the health care law with former President Bill Clinton.
“If they’re not currently providing health insurance for their employees, what that means is they would rather have those additional profits than make sure that their employees are getting a fair deal,” Obama told Clinton.
Obama conceded that some businesses are operating with tight profit margins, but he argued that the smallest of small businesses—“the average small business with five employees, mom-and-pop shop [with] 10 employees”—will be exempt from the regulation.
“So I’m not that sympathetic to a company,” Obama said. “They should do the right thing.”
Gilreath says she has already tried to do the right thing, having offered catastrophic health insurance to her employees.
“I couldn’t get one employee to participate,” she said.
KPCS employees are making anywhere from minimum wage, which is $7.25 in South Carolina, to $13 per hour. Under Obamacare, employers must offer plans that cost employees no more than 9.5 percent of their income, Gilreath said—a financial hit that many of Gilreath’s employees are not willing to take.
“Back then, the rates for the insurance policies were lower,” Gilreath said. “If they wouldn’t do it then, they won’t do it now.”
And KPCS itself can hardly afford to pay the extra money, either. The company bids for contracts with a profit margin of less than 10 percent because the janitorial industry is so competitive.
“Small companies whose product is labor who work on very small profit margins cannot take hits like that,” Gilreath said.
Gilreath’s small business is not the only company feeling the squeeze from Obamacare. Some businesses like Trader Joes and UPS are dropping coverage for some employees and their spouses. Unions are criticizing the law’s effect on the 40-hour workweek. Additionally, many hospitals are laying off workers because of the law’s changes in payments.
“There’s a lot of people who do believe it’s having a constricting effect on the economy,” said Jim Capretta, a budget adviser in the George W. Bush administration.
The law and the administration’s uncertain implementation of it are making employers uncertain and hurting their ability to make business decisions. They might not expand beyond 50 employees. And the new taxes are putting a drag on the economy, Capretta said.
Further, part-time employment is rising relative to full-time employment, which reduces personal consumption and savings, said Avik Roy, a health policy expert at the Manhattan Institute.
“You put all that together, and it looks like the overall effect of the law is to further dampen employment and economic growth,” Capretta said.
Gilreath said she wants the whole law scrapped.
“They need to go back to the table and figure out something that works for everybody.”