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Keeping it in the family

Executives who say they've built close ties to employees are worried costs of Affordable Care Act will erase years of goodwill

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Mark Baiada, owner, and his daughter Janice Lovequist, senior associate, Bayada Health Care. Janice is one of four of Baiada's children who work at the company.
Mark Baiada, owner, and his daughter Janice Lovequist, senior associate, Bayada Health Care. Janice is one of four of Baiada's children who work at the company. - (AARON HOUSTON)

Mark Baiada is caught right in the middle of the health care reform drama.
On the one hand, his Moorestown company — Bayada Home Health Care, which provides home-based care to those who need help with daily activities — will have to expand health insurance to employees under the Affordable Care Act. On the other, Baiada said, he's also hurt by declining Medicaid reimbursement rates for the services his company provides.

Requirements under the ACA have Baiada, the company's CEO, and other family business owners staring at potentially painful cost-cutting decisions at companies that pride themselves on good relations with employees.

Under the ACA, in 2014, some 8,500 of his employees would qualify for coverage, so Baiada is considering cutting the hours of certain part-time workers below 30 a week, to get under the ACA threshold for mandatory employer-based health insurance.

The idea makes him cringe.

"These are people we know," he said. "They have to put food on the table. I feel guilty even having to think about something like that. I want to help them, not hurt them."

He said the family business he founded in 1975, which today employs five of his children, has always sought to foster close-knit relationships with its employees.

"It's not like where you walk into a store and they say. 'We're not going to give you more than 30 hours,' " Baiada said. "We put a lot more care into it, where at a large corporation, it's very mechanical."

Mark Baiada, owner, Bayada Home Health Care: “We have a simple rule about money — more has to come in than goes out.”

Baiada said he agrees with the ACA's objective of expanding health insurance. But he worries the numbers don't add up — the company projects providing benefits to currently uninsured part-timers is equal to a raise of about $1.50 an hour — compounding problems for a home health care industry that generally runs on low margins. The company's profit margin is about 1.75 percent, he said.

"We have a simple rule about money — more has to come in than goes out," Baiada said.

And there's only so much more Bayada can cut, as it's already rolled out wage reductions and service cuts in the past.

"To move everyone below 30 (hours) would create a shortage of workers," Baiada said. "Our clients need good aides."

This is not an uncommon problem for family-owned businesses, said Joe DiBella, managing director and executive vice president of Conner, Strong & Buckelew, the Marlton-based employee benefits consultancy.

"Family businesses generally have much stronger social connections and bonds with their employees, and that makes it tough to enact the wholesale changes that may be needed to comply with the law," DiBella said. "It is easier for a big corporation to make changes and do that on the basis of shareholder value."

DiBella, who advises Bayada and estimates family-owned businesses are about one-quarter of his company's estimated 400 clients, said such businesses have to tread carefully to maintain good relations with workers.

The best solution, he said, is to simply be direct. If the business has good rapport with its workforce, employees are more inclined to hear out executives, DiBella said.

"They need to have straight talk with their employees," DiBella said. "Regardless of how their employees feel about the law, there will be costs. They need to explain: 'This is the additional cost it will bring to the organization. There is nothing we can do about it, because we have to comply with the law."

DiBella said he expects the average employers' annual health premium will increase 2 to 4 percent under the ACA. Strategies will vary, he said, but some changes, like instituting wellness programs or self-funding insurance offerings, can help defray cost cutting.

But cuts will continue to be part of the conversation for family-owned companies. New England Motor Freight, for instance, already has enacted the hour reductions Bayada is considering.

Thomas Connery, chief operating officer for NEMF, an Elizabeth-based family business owned by Myron Shevell, said the trucking company cut hours for about 400 part-time employees — mostly dock workers and customer service representatives who had been working about 33 hours a week.

"Everyone is capped at 29 hours," Connery said. "Period. End of story."

Connery said it was tough to explain to employees the rationale for the cutback, which was met with resistance.

"It does create some animosity," Connery said. "In reality, all you're doing is passing along costs. They think the company is cutting hours, when it is really being forced."

Baiada is searching for ways to make ends meet without more cuts. He does have a bit more time than most: The company's enrollment year runs from July 1 to June 30, giving it until mid-2014, rather than Jan. 1, to be fully compliant with the ACA. Right now, he's lobbying the state to increase spending on Medicaid services, which Baiada said would ease burdens on his business.

"I'm hopeful we can beg or twist the government's arm to pay its money," he said.

Bayada said funding has declined for the Personal Care Assistant Program, an optional benefit offered to New Jersey Medicaid recipients who have some impairment and need help with daily living activities — services Bayada provides.

Horizon Blue Cross Blue Shield of New Jersey, the largest of the four managed-care companies that administer the state's Medicaid system, cut its reimbursement rates 10 percent last September, blaming reduced state funding for health programs. Messages with governor's office and Department of Human Services were not returned.

"The irony is, home health care reduces health care costs in the long run, because it keeps people out of hospitals and nursing homes," Baiada said. "We're trying to make home care easier and more affordable. This makes it harder."

Baiada says despite the gloomy outlook, he remains hopeful his company will make the transition without too much disturbance, though it will require agonizing numbers crunching and aggressive lobbying. You could say Baiada is looking after his company's interests like a protective parent.

"Our clients need help; our employees need jobs," he said. "I'm optimistic we are going to work something out. But it seems ominous right now."

E-mail to: tomz@njbiz.com
On Twitter: @biztzanki

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