Growing up always involves growing pains, and for the health club industry those growing pains take the form of increased regulations. This year, the industry can expect some growing pains on both the federal and state levels. The anticipated new laws, imposed for the better or for the worse, carry with them a responsibility for club owners — not just to implement them but also to let their voices be heard before any votes are even taken. So which issues should club owners watch for in 2004?
On the federal side, two health club-related bills stand out for possible passage in 2004. The IMPACT Act (Improved Nutrition and Physical Activity), approved by Congress before its last break, provides $250 million in grants for eligible organizations to help address the obesity problem. Grants would be available to provide health services for improved nutrition, increased physical activity and obesity prevention. The Senate approved the bill (S. 1172) in December 2003 and the House will take up the bill (H.R. 716) in 2004.
“We are excited about that,” says Kevin F. Buckley, deputy director of government relations at the International Health, Racquet & Sportsclub Association. “The obesity issue is something that this industry is truly passionate about addressing.”
Congress also introduced the Workforce Health Improvement Program (WHIP) Act as H.R. 1818 and S. 1491. The bill would allow employers to deduct the cost of employee health club memberships. Employees would not be penalized for the deduction since the bill ensures that the benefit is not classified as additional income. Currently, employers are already allowed to deduct the cost of on-site workout facilities, so this evens the field for employers who don't have the real estate or capital to provide fitness facilities on site, says Buckley.
While the legislation did not pass in 2003, IHRSA is optimistic that it will be voted on in 2004, says Buckley. However, it may have to be attached to a larger piece of legislation that is likely to be approved in order to get it passed, IHRSA says.
Two other federal bills, the Small Business Health Fairness Act and the ADA Notification Act, could affect the fitness industry in 2004. The Small Business Health Fairness Act allows small businesses to band together across state lines under trade associations such as IHRSA. The House passed the measure in June 2003 and the Senate will take up the measure in 2004. The ADA Notification Act would allow businesses to be notified of an alleged violation of the ADA and would allow time to correct the alleged violation before a lawsuit could be filed.
Beyond federal legislation, states are working on their own policies that could affect the industry. After all, states watch what other states are doing, meaning that a bill introduced in one state in 2004 likely could end up being introduced in other states in the near future, says Buckley.
One such law deals with the use of automated external defibrillators. The Illinois Legislature is debating a bill that would mandate that clubs in the state have at least one defibrillator on hand and at least one person on staff that knows how to use the machine. Illinois is the furthest along on the bill, having passed both houses to be given an amendatory veto by the governor. The bill is expected to be one of the first picked up again in the next state session, says Buckley. Michigan's Legislature is one step away from sending a similar bill to its governor. New Jersey and Rhode Island are working on similar measures.
In Illinois, private health clubs would have to comply by July 2004 and public health clubs would have a more phased-in plan. However, both would be required to have a written plan on file with the state by Jan. 1, 2005, detailing how they would respond to medical emergencies and coordinate with local emergency medical services on their plans. The health clubs would also be required to test and maintain the device per the manufacturer's recommendations. Non-compliance would result in penalties of $2,500 to $3,000.
“I would be surprised if other states didn't follow,” says Richard A. Lazar, president and CEO of the Early Defibrillator Law and Policy Center in Portland, OR. “This is one of those things where trends are created pretty quickly.”
While some in the industry accept the proposed law as necessary, others have voiced objections over cost and liability issues. Lazar sees the principle objection focusing around cost, since each defibrillator costs about $2,200, and staff training could cost $100 per person or more. However, Buckley sees the main objection revolving around liability concerns.
“When you mandate it (use of defibrillators), you are changing the duty of care,” Buckley says. Plus, court cases stemming from the inappropriate use of or lack of use of AEDs could cost gyms big time, even if they win the case.
Another state issue involves sales taxes, sometimes dubbed as a service tax. Essentially, a service tax is a sales tax on membership dues. Several states and even some cities are considering the measure after three consecutive years of budget problems, leading to spending cuts, reduced workforces and dry rainy day funds.
“When they've reduced revenue and they've cut spending where they can, then they may have to look for new sources of revenue,” says Buckley. “The one good thing in all of this is all the indicators that say states will see increased tax revenue [with an improved economy].”
Twenty-one states already tax health club dues, but that number may rise despite a stronger economy, Buckley says. “If your state isn't already taxing club memberships, there is a strong chance that your state would enact it,” he says. Proposals also are occurring on a local level as towns try to impose service taxes.
If passed, the service taxes, which range from 3 percent to 7 percent, could cause some gym owners to increase their membership fees and possibly lose members. For health clubs with set membership fees, passage may force them to eat the cost.
CONTINUATION OF SERVICES
Gyms in the Northeast are hearing talk of continuation of services laws. Some legislators in the Northeast have considered requiring health clubs to re-sign members at the end of their contract each time, even if they are on a month-to-month contract.
“That would be an administrative nightmare for clubs,” says Buckley.
IHRSA spent a lot of time educating the legislators who introduced the bills about the way the industry works, Buckley says. So far, none of these bills have gone anywhere, but Buckley cautions that other states may try the same legislation in the future.
Clubs owners don't need to passively sit and watch state and federal legislators impose laws that don't work for the industry or not address issues that need to be addressed.
“There is a real need for club operators to educate legislators about what their business is and how they conduct their business,” says Buckley. “I am often surprised by what I hear in legislative offices about our industry. It's like they are writing laws that deal with our industry 20 years ago.”
Buckley has found that state and federal legislators are responsive to business owners from their districts.
“We hear from Congressmen all the time that they want to hear from clubs in their districts,” he says. Legislators can't be experts on every issue so they look for people who can help them understand. Before the federal or state governments enact laws that affect health clubs, Buckley urges club owners to call or visit with their representative to let their opinion be noted.
“Club owners and business owners have more influence than they realize,” says Buckley.