The Trump Effect: Small Business and Regulation with Rob Reed
See how Trump administration policies may address the Affordable Care Act (ACA), including repeal and replace efforts, provisions likely to be in any ultimate potential legislation, and the potential impact on workers’ compensation insurance.
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Gene Marks: So welcome, everybody. My name is Gene Marks. I write every day for the Washington Post, as well as a few other outlets in and around, Forbes, Entrepreneur, Inc. Magazine. I also run a small company outside of Philadelphia. We're a 10-person technology and financial management consulting firm. And I'm here with Rob, Rob Reed, not Robert Reed?
Rob Reed: Yes, Rob.
GM: Rob Reed. He used to be the father on The Brady Bunch, actually, for those of you that are fans of the show. But now, he's completely changed careers. And you were working at Paychex. You are the insurance compliance manager, right?
RR: That's right.
GM: --At Paychex. And you've been with the company for three years.
RR: Three years this week.
GM: That's awesome. So you're an insurance background?
RR: Yes. Prior to coming to Paychex, I did over 20 years in the insurance industry.
GM: That's crazy.
RR: And I did better than a decade at Nationwide Insurance, and then moved over to the Hartford.
GM: Wow. And what precipitated the move? This is – I mean, because this is a more of a specific application of your sort of skills, right?
RR: Yeah. Well, I was aware that Paychex had involvement in insurance because Hartford is one of the key partners.
RR: And then my awareness of that led to my looking into the compliance role here. I'd always wanted to get into compliance, and really admired Paychex as an employer, so when I saw the opportunity, it was kind of an easy decision.
GM: You know, most people you want to be superheroes or baseball players, but you've always wanted to get into compliance, is that —
RR: That's right. That's right, since I was just a —
GM: Young boy. Right. When you're going to be chosen to pitch for your little league team in the World Series, you said, listen – So now I've got to study and be a compliance manager.
RR: That's right.
GM: Fair enough, but what you do is actually very, very important thing, because at Paychex, compliance is a big role. I mean, I am a customer of Paychex, my company.
RR: Thank you.
GM: And you – right, thank you, because I do not have the skill set or the intellectual capability to keep track of all of the nonsense that's going on in Washington and in Philadelphia, where I'm from and all around the country that affect my business, so that's what I'm expecting you guys to do. So thank you for doing that. How many people report into you?
RR: 18. We have a team of 18, and actually picked up an additional five last week.
GM: No way. So and you are – when you talk about insurance compliance, it's health care, right? Is it just health care, or is there –
RR: No, we have, in that realm, under that umbrella, we've got both the P&C business, which is primarily workers’ comp, as well as group medical and benefits, things like flex spending accounts, Health Savings Accounts, that kind of thing. We've also got a benefits administration division, BeneTrac, and then also the PEO is part of that as well.
GM: So that's Professional Employer Organizations are all part of that. So this is a giant job, right? I mean, this is, you're not talking about just changes that are made for all those different types of things on a federal level, but also at the state and the local and municipal level as well, you get to keep track of all that stuff. How do you keep track of all that stuff? And a case of Red Bull by your desk, right?
RR: Lot of coffee and a team of people who really know their stuff. That's how I do it.
GM: That's great. So busy year for you with health care reform?
RR: Very busy year, and, as you might have guessed, part and parcel of the fact that health insurance is in my world and also the employer shared responsibility reporting is also within my world, so that was very busy, obviously. The things that keep me up at night and the things that keep me very busy and my staff as well are the same things that are on the minds of small business, which is the ambiguity, the uncertainty of all of this. There isn't a day that goes by that me or my team isn't asked to weigh in on what the latest news means for us and/or for our clients. And it's around-the-clock cycle, keeping track of it.
GM: Got it. So OK, so the health care reform bill was never taken to a vote in Congress, so it's still out there. The Republicans are doing – are talking that they are still discussing it and maybe doing something with it. That sort of remains to be seen. But the President himself has said that Obamacare is going to explode. Paul Ryan has said things similar to that. Do you believe that they're right? Do you, when your customers are coming to you and saying, oh my god, this whole health care system is falling apart. Do you think that there is some reason to that statement?
RR: I would say that there's – it's not certain that it will explode.
GM: Right. Obviously – First of all, I don't know what exploding means. There's no violence here, right? There's no people blowing stuff up on the streets, but –
RR: I think a lot of it has to do with the Affordable Care Act's federal exchange and the insurance for the individual market, which, to a certain extent, is kind of outside of the concern of my team.
GM: Yeah, because you're dealing with businesses.
RR: Correct. And that's the individual, right?
RR: But obviously, that has a carryover effect, and it has an impact on the overall legislation. And so we have to watch that as well.
GM: So I have a – again, I have a 10-person company. I have a lot of our clients that are small businesses. I speak to a lot of small businesses. When you look at the rules for the Affordable Care Act, if you have less than 50 employees, 50 full-time equivalent employees, you're not required to provide health care insurance, right? There is even a tax credit that's available to a lot of small businesses that meet those requirements. So you can do – you pretty much do what you, want as it is. And yet, I personally hear, and this is anecdotally, a lot of small businesses complain about the Affordable Care Act. They think they – do you know, number one, do you hear the same from your customers? And can you – I'm just curious what your thought – why would a small business owner complain? They're not subject to the biggest parts of the law. What do they have to complain about?
RR: Well I think from their perspective, they hear so much about the rates that are changing. And I think from their perspective, that's a concern. I think, also, it's a concern for their employees. And so, I mean, as a small business owner, I would assume that your employees, obviously, they have to meet the individual mandate.
GM: They do.
RR: And so they may come to you –
GM: They do.
RR: With questions about that, and I think that's a factor as well.
GM: Right. But then there's also just the overall environment of ambiguity, of not knowing what's going to come. I think a lot of the discussions in my shop, we talk about the fact that I think small businesses, and as well as mid-sized businesses, would, to a certain degree, just be happy to have a final answer, to know what they need to comply with.
GM: Because we don't like surprise.
RR: It's the unknown. It's the surprises. Makes it difficult to plan.
GM: It does.
RR: Makes it difficult to forecast.
GM: It does, particularly if you're looking at premium increases, whatever they might be. I mean, how do you budget for something like that? And then you have to budget for everything else. And it does make it a lot tougher. So as somebody who talks to a lot of small businesses, do you sort of empathize?
RR: Absolutely. And the one thing I would add, the nuance to what you said earlier, was that you said that they don't have to provide health insurance, and once they choose to offer insurance, oftentimes it has nothing to do with the legislative environment. It has to do with the competitive environment as an employer.
GM: And do you find that a lot of small business owners – and again, in our defense, we have a lot of things to worry about. But that we don't know as much as we should. What should we be knowing about it?
RR: In terms of is there confusion, there's absolute confusion. I think it's why Paychex plays the role that we play, both in advising clients, whether or not to buy health insurance for their employees, and what type of plan to offer, what types of details in the plan to offer. Do you want to offer a flex spend account? Do you want to offer a health savings account? Just a group medical plan.
RR: All that complexity, we work through with them. But then also, if they are an applicable large employer, we have to work through the reporting requirements, which are very complicated, require a lot of data from the payroll side, as well as data from the insurance side. And we're very fortunate that, oftentimes, for our clients, we have both of those data points. We can combine them into the filing. But at this point in time, we still have some clients coming to us to ask for assistance in filing their 2015 Employer Shared Responsibility filing, so they never filed for last year, let alone for this most recent filing that just closed up March 31. So that shows you if we have clients out there that were not previously our clients, but are coming to us because they are getting notices from the IRS showing you still haven't filed for 2015, we're still holding you accountable to do so, you need to get it done.
GM: Got it.
RR: We're still getting approached. So that, to me, is an indication there's a great deal of misunderstanding out there.
GM: Right. And so what can a business owner do about that? Small, medium, or large, where are they – I mean, clearly, they can outsource the work to Paychex and you guys can handle that on the compliance end. But honestly, I've always told my clients, Rob, that it's a – just because you outsource something doesn't mean you wipe your hands of it. You have to understand what's going on. You're just asking another firm to take care of the execution of it, you know? Where would you recommend that a guy like me go to understand what's going on in healthcare?
RR: So there's really, believe it or not, there's great information on the IRS web site. And I know this because in last year's filing for the 2015 tax year, Paychex actually partnered with the IRS to write up some of the FAQs for small business owners, the frequently asked questions that they just come up over and over again. They not only came to us to say, with your insight for clients, what are the things that they need to know? What are the things that they're having difficulty understanding, A, and then B, what's the – help us help us craft an answer that they'll comprehend, that they'll understand.
GM: Great, so the IRS website is a really good place to go. That's really, that's very helpful. OK. Now, why have Health Savings Accounts become so popular?
RR: I think the tax incentives involved in it. The contributions are tax-exempt. The interest earned while the money is sitting there is tax-exempt.
GM: Tax free, right.
RR: And then, of course, the distributions are also tax-exempt. So it's got those benefits. I think one of the main appeals in the industry as a whole is that it really puts the individual policyholder in the position of really being a better consumer of health insurance. They really have a more vested interest to look carefully at the decisions that they're making for their own personal care, and I think that's appealing. And just the overall affordability of it. I think obviously when you partner with a higher deductible health plan, the premium is lower on the higher deductible plan, and then you get to kind of control how much you think you need in that Health Savings Accounts.
GM: It's kind of like, oh, I always kind of liken it to a 401(k) for your health care, right? You can carry over some amounts as well, and depending on your age, you can contribute more. And it's seen a lot of growth. How does this impact things at the state or the local level? I mean, we have the Affordable Care Act on a federal level and all the issues there, but does this impact businesses at the state and local level, and how?
RR: At the state level, what we're seeing a lot of is we're seeing, again, like Hawaii, Massachusetts, New York, several other states have some proposals popping up for single payer or for other state-level legislation to kind of fill the void if Obamacare gets repealed.
RR: And traditionally, historically, those haven't been able to pass. I think the one that we paid the most attention to in my group was in Vermont with the thought that just the political nature in that state might make it a viable piece of legislation to pass. And that did not. It has the same hurdles and problems that it does at the federal level, frankly, in terms of how are you going to pay for it?
GM: Right. So it's another area that business owners have to keep an eye on, or rely on you to be keeping an eye on it, as well. I speak to and involved with a lot of associations. If they – with the Affordable Care Act, they kind of got out of the providing health care to their members business. If that comes back on the table, if anything come back on the table what does that mean?
RR: Well what it means is that businesses like, as I'm sure you're aware, businesses that are in the same industry and are affiliated through some sort of association can kind of pool themselves together and purchase medical plans together as one entity. And obviously that kind of spreads the risk amongst the whole pool and should result in a more favorable rate for that group than maybe a smaller business on its own would be able to attain. But it's interesting. You're absolutely right, under the Affordable Care Act, those really fell out of favor. And when I've spoken to small businesses about it –
GM: I bet you they miss it.
RR: Some miss it, and others say that they never found the rates that are affordable to begin with there. And I guess that depends on the industry and it depends on who you're speaking to. But that's one that I was very interested to see it reappear.
GM: Yeah. I was, that kind of came out of nowhere, as well. And I know it's a good thing for the associations because that was another reason to belong to the association, so you can participate at the — it'll help their membership dues. But it's sort of – I was sort of on the fence as to the benefits that it was actually providing their members. Do you think that it'll happen?
RR: I think they're looking at all options of different features to add that will take responsibility away from the federal government and put it back in the hands of businesses themselves and the states wherever they can, and that's something that obviously would take the decision making down the local level.
GM: Yeah. Definitely depends on the power of the association's lobbying efforts, as well, which I know there's real estate lobbies and pharmaceutical lobbies. I don't know how powerful the associations' lobbies are but –
RR: And speaking of lobbies, I think one of the other interesting things that turned up in the Republican plan was once again kicking the Cadillac tax as they call it--
GM: To like to 2020 something, right?
RR: Yeah, and that was something that I think, because it had bipartisan support to repeal it, I was surprised that it remained in the legislation, because I fully expected to see it –
GM: I thought so too. And yet they need they need revenues from somewhere, so they might – but it was 2025 I think they pushed it back it to, which is, for me, that's like another lifetime. Who knows, would we be like flying around in cars then. But it's there as part of their projections because I think it's just the loss of revenue from some of the repeals –
RR: That's been kind of the difficulty is if you do get rid of that, that was kind of part of the original revenue plan of the Affordable Care Act and how do you solve for that.
GM: Thank you it's a great conversation, Rob. I really appreciate it.