Case Study: Bakery Owner Talks About Coping With Health Insurance Changes

Sandy Huffaker for The New York Times Rachel Shein, center, is trying to figure out how to comply with the new health insurance law.What would you do with this business?

Last week, we published a case study about Baked in the Sun, a wholesale bakery and distributor that is trying to decide how best to comply with the Affordable Care Act. Starting in January, the new law requires businesses with 50 or more full-time employees to offer health insurance or pay a penalty. Owned by Rachel Shein and Steve Pilarski, husband and wife, the company employs nearly 100 workers to bake and deliver freshly made pastries to coffee shops, hospitals and hotels in Southern California.

Baked in the Sun has offered health insurance to its employees in the past but many are young and healthy and have preferred to keep more money in their paycheck, rather than contribute to a health plan. Soon, though, almost all workers will have to carry health insurance — through their employer, a government exchange or other source — or pay a penalty. And, as the case study discussed, Ms. Shein and Mr. Pilaski are trying to decide whether they will offer health insurance, pay a penalty or outsource enough work that they can reduce their head count below 50 and be exempt from the law.

The article elicited lots of comments and strong opinions, as well as reports in other media outlets, including CNBC, which included Ms. Shein in a panel discussion about her company’s situation. Some readers argued that Baked in the Sun has a moral obligation to offer coverage. Others argued for a single-payer system that would allow owners to stop worrying about health insurance and focus on running their businesses.

Andrew Greenblatt, a senior vice president at Benestream, which helps low wage employees apply for government benefits, pointed out that under the Affordable Care Act, Medicaid has been expanded to cover families earning up to 138 percent of the poverty level, which means that workers who make minimum wage, especially single parents, may qualify.

And Alan Cohen, chief strategy officer for Liazon, a private insurance exchange for companies, suggested in a comment that many employees will be better off if the bakery chooses not to offer insurance and instead pays the government penalty. That’s because the employees would be likely to qualify for a subsidy at a government exchange that would allow them to insure their whole family — but only if their employer does not offer health insurance.

Of course, because neither the minimum level of coverage, nor the costs to all the insurance options have been finalized, lots of uncertainty remains. We contacted Ms. Shein for a follow-up conversation that has been condensed and edited.

A number of readers suspect that you are underestimating how much it would actually cost to insure your employees. Have you taken another look?

The insurance plans are still under development. My broker recently found one that was less than what I had found, but I’m not sure anyone knows what the final rules and prices will be.

Have you thought any further about how many of your employees will actually sign up for insurance if you offer it?

In the short run, when the individual penalty is low, there might not be much participation. We plan to have a meeting with our employees to see what kind of insurance they might want and which of them might be covered elsewhere.

Did this discussion have any impact on your thinking about whether you will pay the penalty or offer insurance?

The employees will all have access to health insurance whether we provide it, or we pay the penalty and they purchase it using a subsidy on the government exchange. We need to look at all the costs and tax implications and do whichever is least expensive for the business.

Are there any reader questions you want to answer?

Some readers claimed it was a moral imperative to provide insurance — but all employees will have insurance under the law.

Some readers thought your profit margin was too low and questioned how well your business was doing. What was your reaction?

Like many entrepreneurs we have great years where we can take vacations and put money into our kids’ college funds. Some years are leaner.

Do you think your customers would pay a few more cents for your baked goods — especially if it allows you to offer your employees health insurance?

Our products are unbranded and sold in hundreds of outlets so it would be hard to educate consumers about our employment practices. And the popularity of Wal-Mart shows that most consumers just want the best price.

You suggested in the article that you might have to raise your prices 4 percent to cover the cost of providing health insurance. But 4 percent of $8 million — your annual revenue — is $320,000. That’s a lot more than you estimated the cost of insurance. Couldn’t you just raise your prices 2 percent?

Yes, a 2- to 3-percent increase could cover the costs, but it’s a low margin business and pennies matter so we like to build in some buffer.

Would you favor a single-payer system?

I am in favor of a system that doesn’t penalize a business for being successful and able to hire more than 50 people and doesn’t deter us from wanting to grow. I am in favor of a system where everyone pays in, and everyone is covered. If that is a single-payer system, I’m for that.

You're the Boss Blog: B&B Owner Responds to Web Site Review

Criticism can be hard to take, especially when your business is your home. Last week, however, Nancy Galloway and Andre Laporte welcomed our comments and suggestions as to how to improve their inn’s Web site. “It is like having a great editor,” Ms. Galloway said. “You need someone who is looking at your work with a fresh perspective. I am too close to our site and the comments were quite helpful and we are taking many to heart.”

In a recent conversation that has been condensed and edited, Ms. Galloway and I discussed the various opinions — including the 17-minute video that one commenter posted.

Many people focused on the need for new photos. Do you agree they need to be improved?

Yes, we agree with the emphasis on bigger pictures. We checked out the Four Seasons Nevis site, and that was very instructive. Actually it wowed us — that site will be our guide.

There was a push for more information on local activities.

We definitely need to sell the area, as well as ourselves. We will add more on the local artisans, including links to their sites. Those artisans actually sell themselves; we have the broom maker who supplied brooms for Harry Potter, glass blowers, blacksmiths, hand weavers and a phenomenal sculptor — all within a five-minute drive.

How did you react to some of the uneasiness commenters expressed with the social element of a B&B?

I was surprised that so many thought it would be too social. No one is forced to hang out together. There is plenty of space, including separate tables for breakfast and lounging. We will look into that and make it more clear in the description. Also, we do allow kids, as long as they’re babies or 5 and up. Our place is simply not childproof.

It makes sense that reserving a room online would be a core part of a redesign. One reader said people want to be able to book a room at 1 a.m. in their pajamas. Where do you stand on adding that functionality?

We’re working on getting the online reservation system up and running. Not being techies, it’s a bit difficult for us, but we’re getting there. We initially thought we would use Easy InnKeeping because we already use their offline system. But the cost is very hard to digest — the setup is $365, then $65 per month, and $15 per reservation. One reader recommended Rezovation, and they run $649 for the initial start-up, $250 per year, $99 per month and $15.50 per reservation. We are looking into other options.

How do you attract reviews and how have you worked with TripAdvisor?

For the past year we have given each guest a postcard to take home and sent an e-mail a week after their stay asking them to review us. It works, especially the e-mail, because asking people to remember a URL is just too much work. We currently don’t pay TripAdvisor for the extras they can provide to attract viewers but are taking a close look at putting marketing budget toward TripAdvisor. The other key site for us to work with is Iloveinns.com.

There were a few design-oriented comments. Were they helpful?

Someone pointed it out, and we have been wondering about the wasted space on our site. Many sites we see have huge color blocks on either side of a center panel of text. I actually thought ours looked rather cluttered. Another tough one to act on is the recommendation to include people in photographs. I have received the opposite advice over the years — to leave the pictures without people, so people can envision themselves in the photo. I am not sure what to do with those two points but will discuss both with our new designer.

Are you open to a redesign of the inn?

One or two mentioned that we needed an interior decorator. Sorry, that’s not happening. But I am decluttering!

Would you like to have your business’s Web site or mobile app reviewed? This is an opportunity for companies looking for an honest (and free) appraisal of their online presence and marketing efforts.

To be considered, please tell us about your experiences — why you started your site, what works, what doesn’t and why you would like to have the site reviewed — in an e-mail to youretheboss@abesmarket.com.

Richard Demb is co-founder of Abe’s Market, an online marketplace for natural products that is based in Chicago.

You're the Boss Blog: An Owner Rethinks How He Spends His Marketing Dollars

Generating revenue along with the buzz.

Back in January, Jeff Chinman, president of Broadway Kitchens and Baths, which remodels kitchens and bathrooms in Manhattan, Northern New Jersey, and Stamford, Conn., left a comment on this blog.

In the comment, he wrote that he was now on his third or fourth revamp of his Web site, that he had a Facebook page and was trying to figure out how to integrate Twitter and Facebook. He went on to ask whether he was really getting business in return for his efforts or whether he was just bothering his “little bubble of friends and acquaintances.” He said that his big question for 2013 was where he should invest his marketing dollars: Should he stick with radio and print or try harder with social media and Google AdWords?

Confused about where to start and whom to hire to assist him, Mr. Chinman posted his comment asking for advice. After speaking with him about his 18-year-old business, I wrote a blog post that talked about his frustrations. I suggested that he update his Web site, find a way to collect e-mail addresses, start blogging and get his 10-person sales team to start tracking where their leads come from. Many commenters also chimed in with suggestions that he investigate Pinterest and Tumblr, use better quality photography to highlight his kitchens, reach back to happy customers for testimonials, address some negative reviews on Google+, and do more face-to-face networking.

Courtesy of Broadway Kitchens & Baths. Jeff Chinman: Am I just bothering my little bubble of friends?

I recently checked back with Mr. Chinman to see what he thought of the suggestions and how things were progressing.

Was the information helpful?

I thought your advice was right on target, and I have three top priorities now: One, launch new WordPress Web site. Two, create a blog. Three, use local online market ads.

What did you think of the advice your received in the comments section?

I love the advice from Thomas Forgione that taking advice this way is “dangerous and usually results in poor marketing decisions” –  you get what you pay for. Most of the comments confirmed what you said and where I was going, but in addition, there were a few other ideas that I thought need more exploring, such as incorporating YouTube, tracking leads by installing a tracking code, and injecting some personality into the photos to create a connection like Men’s Warehouse.

Did any of the information surprise you?

I was not really surprised, but I thought it was interesting that someone said I should actually remove my Facebook pages.

Have you implemented anything yet that was suggested in the post?

I am hoping to launch my new Web site by April 1.

Are you planning on cutting back or increasing any of your print or radio advertising?

I am cutting back my print advertising to focus on local Google target marketing.

Are you planning to add any new staff or consultants?

I received about three or four solicitations for Internet marketing. Most are offering the same old “optimize my Web site, and they will get me No. 1 in Google searches.” Been there, heard that before.

How has business been lately?

Business has been improved starting the second or third week in January. I think it’s market driven. Since the 2008 recession, I think this is the year that people will spend again. Added to that is the built-up demand from people who put off their renovation, because of fear.

Melinda Emerson is founder and chief executive of Quintessence Multimedia, a social media strategy and content development company. You can follow her on Twitter.