Cutting Tool Engineering
May 2013 / Volume 65 / Issue 5

Health care law is daunting

By Keith Jennings

One question I’ve been getting asked a lot lately is, “How will the new health care legislation affect your shop?” I can’t answer confidently because I’m not sure. Even after talking with insurance and human resource professionals, an accurate assessment of what to expect isn’t easy to come by. My impression is those professionals are still trying to understand it themselves, and trying to explain it to a manufacturing company is a perplexing mess.

Nonetheless, they consistently expect the legislation’s impact to be more bad than good, more costly than less and more complex than simple. As if shop owners and managers didn’t already have enough to deal with.

At our company, we pay employees’ medical premiums and have for a few years, but I can’t guarantee that will continue. Perhaps the costs will become too high and we’ll have to pass on an increased share of the expense to employees. This means less money in their pockets—not a beneficial outcome. In addition, I’ve read that tiered plans allowing owners, managers and other employees a richer insurance package will be altered or disallowed, possibly removing another benefit.

After digging into the details, however, I’ve discovered many of the regulations don’t apply to smaller companies or otherwise-exempt organizations. This could include a sizable number of small machine shops, so some of the scary scenarios may not materialize. But these shops are still likely to pay higher premiums, and, for shops with 50 employees or more, the impact of those costs could be huge. Our company has 48 employees, as well as a few temporary workers, and I’m reluctant to add staff with such uncertainty.

One primary concern of mine is that a staff reduction will be necessary to remain competitive and profitable. It’s already challenging to manage a manufacturing business. Running it with fewer employees isn’t desirable, but may become necessary.

What if health care legislation and other laws end up requiring shops to reshuffle employees or reduce expenses? I’m not expecting that a massive wave of terminations will automatically be necessary, but I’m being told to prepare for some changes that may be unavoidable. If cuts are required throughout the manufacturing sector, the potential loss in manufacturing employment would be troubling because it’s become a growing part of the economy once again.

Unfortunately, private companies and small businesses can’t absorb all of the health care legislation’s cost increases. Machine shops require expensive equipment, sophisticated software, advanced cutting tools and highly skilled employees. It’s already a high-overhead endeavor that requires a willingness to accept risk. Hopefully, we’ll be able to continue providing the job opportunities that have come back in recent years as manufacturing has grown faster than the general economy. I’m confident our insurance agents and HR consultants will be able to help us understand and manage the impact of the legislation.

The future of machining is bright, but perhaps it will take place with a different generation of employees and a leaner business model than before. What’s certain is costs will continue to rise and careful planning is essential.

I welcome your thoughts and concerns. Walking through the minefield of global industry and government regulations is definitely easier when we go through it together. CTE

About the Author: Keith Jennings is president of Crow Corp., Tomball, Texas, a family-owned company focusing on machining, metal fabrication and metal stamping. Contact him at kjennings@jwr.com.
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