Small Business Considers How to Manage Growth, Comply With Healthcare Mandates —Wall Street Journal

Health Costs on His Mind, Small Factory Owner Looks for Ways to Cope With New Law

Emily Maltby and Sarah E. Needleman at The Wall Street Journal talk with a small business owner outside of Chicago who’s considering ways to manage growth, preserve profit, and comply with the new healthcare law.

Automation Systems, with with sales of about $1.6 million for 2012, currently employs 40 full-time workers, mostly low-paid employees who monitor the factory equipment. If sales were to continue to rise, the plant could, conceivably, employ 50 full-time workers in 2014. Under the new health-care law, the Affordable Care Act, businesses with 50 or more full-time equivalent employees will be required, starting in that year, to offer workers health insurance or potentially pay a penalty.

The expense, says owner Carl Schanstra, would drive up the cost of his labor. So he doesn’t want to let employment at the factory reach that number:

Sales at Automation Systems LLC, a parts-assembly factory in the Chicago suburbs, dropped 60% following the 2008 financial collapse. Owner Carl Schanstra was able to get the firm back on its feet by breaking into new markets, such as the auto industry. Sales are up 12% this year, and are likely to rise again next year, too.

But for the 34-year-old, the expected growth in sales brings a new concern. He is worried that as Automation Systems continues to expand, it will be subject to a provision in the health-care overhaul that could damage its bottom line.

Mr. Schanstra is contemplating various strategies he can take next year in order to sidestep what he believes are significant burdens of complying with the law. In fact, he’s considering whether he should split his manufacturing firm in two.

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Small Business Owners With Close to 50 Employees Consider How Best to Manage New Healthcare Compliance Mandates