White House Delays Employer Mandate-But What About Small Employers?

White House Delays Employer Mandate-But What About Small Employers?

51
SHARE

The administration suddenly announced last night that the requirement that all employers with 50 or more workers offer health insurance has been delayed until 2015.

If an employer with 50 or more workers did not provide health insurance to their full time workers in 2014, they would have been subject to a fine of $2,000 per worker. The employer would have also been subject to a $3,000 fine for each worker that went to the insurance exchanges if the employer package was not affordable.

Why did the administration delay the large employer mandate?

Because many employers have been in the early stages of planning to cut back the hours of workers in order to avoid having to offer insurance to those customarily considered part time, those who work at least the 30 hours per week the law established for defining a full time worker––and they haven’t been bashful in telling their employees why. In addition, there has been growing evidence that some employers were holding back on hiring in order to avoid more of the mandate costs at a time of high unemployment.

While the administration cited employer administration issues with mandate reporting as the reason for the delay, the bottom line is that the Affordable Care Act (“Obamacare”) was looking like it was about to be successfully labeled a job killer and the administration wanted to avoid that.

You also have to wonder if all of the reporting challenges were just with employers or was the administration also having trouble with the complex employer mandate information systems they will ultimately have to build?

However, this is only a one-year delay. It doesn’t take any of the uncertainty off the table for employers––it simply delays things. But the delay does give employers a chance to see just how the overall law will impact the health insurance market before they make any final decisions. It also gives the Obama administration a chance to reconsider many of the new law’s regulations that have rankled employers.

The administration did not delay the many new requirements facing employers who choose to offer health insurance in the small group market––employers with less than 50 workers. They are faced with the essential health benefit requirements as well as the rating reforms––a small group with lots of young people will see their rates increase significantly because of the new 3:1 age compression rules, for example.

While small employers are not required to offer coverage, if they do they come under that large number of new essential health benefit mandates and group rating rules that won’t apply to large employers. These small group requirements are expected to increase the cost of small group coverage by an average of 15%––with wide variation by state and the average age of the group.

While the new health law enabled small groups to benefit from “grandfather” rules by being able to keep their current benefit package, it has been estimated that only about 15% of employers will still be grandfathered come 2014 because of how stringent the administration made those rules.

These small employers are suffering much the same anxiety large employers are suffering over how they will be able to continue offering coverage under the Affordable Care Act. Many of these small employers are now thinking about dropping their coverage.

Small employers don’t have to comply with the new benefit and rate mandates until their coverage renews in 2014. Earlier this year, a number of insurance companies announced that they were willing to change the anniversary date for small group plans until late 2014 in order to give their small group customers more time to comply.

That offer was met by sharp criticism from some supporters of Obamacare, as well as some state insurance regulators, because it smacked of trying to get around the law.

But now the administration, seemingly out of nowhere, has done just that for large employers.

Why not do the same for small employers as well? And while they are at it, use the time to reconsider the impact many of these regulations are likely to have on the number of small employers continuing to offer coverage.

Perhaps the most significant part of this announcement is that we have finally seen a huge crack in the façade the administration has been maintaining over how well implementation has been going and will go.

What’s next?

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

Leave a Reply

51 Comments on "White House Delays Employer Mandate-But What About Small Employers?"


Guest
BobbyG
Jul 3, 2013

“Perhaps the most significant part of this announcement is that we have finally seen a huge crack in the façade the administration has been maintaining over how well implementation has been going and will go.”
__

They had to take it off the table for the 2014 mid-terms. Which just give the PPACA critics more time to undermine it, though.

Guest
Cynthia
Jul 3, 2013

But, but I thought this was the law of the land, celebrated and ruled constitutional by the Supreme Court?

Got to love our White House, again, picking and choosing what laws to enforce and follow. Gee, the Dictator does what he likes, while the Law be damned! Rest assured that the 2014 mid-term elections had NOTHING to do with this unilateral decision (*sarcasm*).

Talk about double standards — the employer mandate has been delayed, but the individual mandate has not! This is what happens when you have a government that’s dictated by Big Business at the expense of the individual worker and the self-employed, resulting in lots of corporate welfare with lots of red tape, confusion, waits, ineptitude and incompetence. Congress wants its staffers to be exempt from ObamaCare, but we the people are stuck with it. REPEAL it, and repeal it now!

Guest
BobbyG
Jul 3, 2013

IRS Code § 6055. Reporting of health insurance coverage (a) In general
Every person who provides minimum essential coverage to an individual during a calendar year shall, at such time as the Secretary may prescribe, make a return described in subsection (b).
__

“at such time as the Secretary may prescribe”

The Administration is exercising its lawful discretion, sorry.

Guest
Peter1
Jul 3, 2013

So, what about workers in a 50+ company – do they now also get a 1 year extension on the personal mandate?

Guest
Cynthia
Jul 4, 2013

The bottom line is the administration was informed that employers were going to convert even more jobs to part time. So Obama delayed its implementation.
The working stiffs are getting a royal screwing over this damn law!

Guest
Bubba For President
Jul 3, 2013

Is this News a Crushing Blow For ObamaCare’s Credibility?

… The only reward here is for U.S. businesses, which will get another year of potentially full-time employment from their workforce. In return, the U.S. labor force gets another 18 months of uncertainty as to how their employer is going to handle the implementation of Obamacare. Although I noted a study a few months ago that showed only 11% of employers had altered their hiring habits, or planned to cut hours or jobs in anticipation of Obamacare, if any of these employers are big corporations, then we could have a very large problem on our hands.

Not so fast, individual health insurance buyers…

If you’ve been jubilantly cheering the delay up until now and are an individual health insurance purchaser, you may not be nearly as excited to find out that the individual mandate will still go into full effect on Jan. 1, 2014.

A big component to yesterday’s delay announcement has to do with seeing how quickly workers adapt to the new law and sign up for insurance. Admittedly, the penalty for failing to sign up for health insurance for the average worker is going to be pretty low in 2014 (a flat fee of $95 or a percentage of income), but will escalate each year through 2016. There has been talk that individuals may choose to take the penalty since it would be, in some cases, considerably cheaper than purchasing even the least costly health insurance plan on the health exchanges. If a lot of individuals choose to go this route, delaying the employer mandate isn’t going to make much difference to the success of Obamacare.

Guest
Cynthia
Jul 3, 2013

I love how corporations get a reprieve from ObamaCare, but individuals don’t.
Maybe we need to petition the Supreme Court to rule that people are also in fact, people.

Guest
Jeff Goldsmith
Jul 3, 2013

Corporations ARE people, remember? Just a lot bigger. . .

Cynthia is right. The individual mandate is much more troublesome politically. And they still haven’t let the contracts to employ and train all the Navigators to help people sign up- with ninety days to go before the Exchanges are supposed to open.

It will likely be a VERY bumpy Exchange opening. And if it is, as one CMS CTO type said they are trying to avoid- , “a third world experience” – far fewer people will sign up than expected, penalties or no.

This postponement takes very little off the table for 2014- there are still the big price increases likely for small employers and those in the individual market, and a lot of small employers dropping coverage. This law is an electoral time bomb for the Democrats.

It would thus be amazing if there were no more delays. One wonders if fear of angering the President has inhibited the free flow of communication about all the linked implementation challenges.

AND, not that anyone cares, the federal deficit got $10 billion bigger because that’s what the CBO expected Treasury to collect in penalties. . .

Guest
Uwe Reinhardt
Jul 3, 2013

I read somewhere that if individuals do not obey the mandate to be insured, they don’t go to jail. They pay a modest penalty (pardon me, tax), probably just enough to cover the actuarial cost of stiffing the rest of us when they fall ill, get care and can’t pay for it without insurance.

Guest
Craig "Quack" Vickstrom, M.D.
Jul 4, 2013

You mean when they fall ill, and we as a society fail to take care of our brothers and sister, so we instead rob them? Is that what you mean?

Guest
Cynthia
Jul 4, 2013

The Obama administration will re-focus on health care at a later date. They are presently too focused on apprehending Ed Snowden in order to throw him in a cold, dark hole as a deterrent to any would-be whistle-blowers.

Our liberty’s under attack
Our freedom is starting to crack
At tyranny’s rise
A proud nation dies
And rights begin fading to black

The Limerick King

Guest
Peter1
Jul 3, 2013

“There has been talk that individuals may choose to take the penalty since it would be, in some cases, considerably cheaper than purchasing even the least costly health insurance plan on the health exchanges.”

I’m going to claim religious exemption.

Guest
Uwe Reinhardt
Jul 3, 2013

Jeff Goldsmith and I will create a new religion and then claim an exemption, too. Any ides what that should be?

Guest
Uwe Reinhardt
Jul 3, 2013

I think of this provision as one of the more dubious once in the ACA and am glad it is being postponed. Perhaps a bi-partisan coalition will form to repeal it altogether.

If employers find it in their interest to sponsor health insurance coverage for their employees — as most larger ones do — fine. If they don’t, let them concentrate on making widgets and let the exchanges take care of their employees, often with subsidies. That is what the exchanges are for: the provision of social health insurance.

I am puzzled by conservatives who during the 90s wanted to get rid of employment-based insurance in favor of portable individual policies purchased on exchanges, but now lament when business firms dump employees’ coverage onto the exchanges. Is that not what was wanted in the 1990s?

Guest
Rob
Jul 3, 2013

I think I would rather have large corporations pay for their own workers medical insurance out of corporate profits, even if it means less profit to shareholders, as opposed to having me, the taxpayer subsidize the health insurance premiums of their workers.

Guest
Uwe Reinhardt
Jul 3, 2013

Rob:

Few economists believe the the employer-paid premiums come out of corporate profits. We are persuaded by theory and empirical evidence that for the most part, and over the longer run, the employer’s cost of sponsoring health insurance is shifted backwards to employees in the form of lower take-home pay.

Guest
Rob
Jul 3, 2013

Good!!! Perhaps able bodied workers SHOULD pay for their own health insurance(even if it is in the form of lower take home pay) rather than have others subsidize their insurance in the form of higher taxes. I am not an economist, so I will have to take your word for it, but it appears to be a specious argument to claim that by not paying for workers health insurance(or reducing absolute wages) companies would not increase profits by decreasing overhead. A second point that you don’t address is that liberals are constantly clamoring to increase the minimum wage. If the new health care legislation forced corporate giants like Walmart to pay for health insurance of their minimum wage workers, that in fact would be a huge increase in their wages. Lastly, if your argument was truly valid, and paying for health insurance did not diminish corporate profits, why did big business lobby so hard for an exemption, and why did the Obama administration capitulate to their demands?

Guest
Jul 3, 2013

About 96% of businesses with over 50 employees already provide health insurance.

The 4% who do not provide health insurance now were the target of the mandate. This is about 10,000 businesses with a total of 2 million employees.

These businesses are (no surprise) concentrated in retail, restaurants, car wash chains, etc.

Although these businesses are not high in prestige, I have noticed that in every attempt at health reform they are able to defend their cheap-labor business model.

Why can 4% essentially outvote 96% time and again?

That will take a longer analysis than I have the time or the skill to complete.

It could be because America needs these low wage businesses more than it cares to admit. Without them you would have much higher levels of youth unemployment.

Anyways, Dr Reinhardt is correct that the solution here is social insurance.
The employees of Walmart still get free public schools and public libraries and police and fire, even with low wages, because we all pay taxes for these public services.

The only thing I would like to see is for those businesses which do not provide health insurance to pay higher payroll taxes. And not by some obscure 30 hours formula either……just add 2 or 3 per cent to their Medicare tax assessment.

Bob Hertz, The Health Care Crusade

Guest
Rob
Jul 4, 2013

I’ll say it again, why would the Obama administration throw the most vulnerable, underrepresented and underpayed workers in America under the bus so to speak, and allow their employers to be exempt from the health care mandate and make the tax payer pay for their health care benefits , and subsidize the profits of just those industries you mentioned? You don’t site any references for your statistics, but even if they are accurate(which is debate able), 2 million workers are a lot of hard working individuals to turn your back onand throw under the bus. If your statistics are accurate, How is it that 4% of businesses are able to so effectively lobby the Obama administration that it would(embarrassingly) back down from its insurance mandate? Why should taxpayers take on the burden of subsidizing the health insurance of these able bodied workers when as you say 96% of all other businesses are able to provide that benefit? Wouldn’t forcing companies with a high percentage of low income or minimum wage employees, realize a large increase in wages if their companies were required to provide health care benefits? The solution is not a hodgepodge of regulations where some companies provide benefits and some do not, nor is the solution for some segments of the population , through either age or economic status get free or subsidized health care benefits while others do not. The solution is a national health care system to benefit everyone equally,and not the few, paid with a fair and equitable tax.

Guest
Peter1
Jul 4, 2013

Rob, the taxpayer is subsidizing no matter what. Employees are not taxed on the benefit and the business deducts the expense from their tax return.

Those not covered at work will have to get insurance through the exchanges and whatever taxpayer subsidy they can get to help pay.

I agree on a national (non-private insurance) system but that will be taxpayer funded as well. That won’t happen until health insurance is no longer profitable for private insurance companies.

Guest
Jul 4, 2013

Nobody said the process would be without pain, but that doesn’t mean Obamacare wasn’t the right step.

Guest
Peter1
Jul 4, 2013

The “right step” should include cost controls not just using subsidies to compensate for business as usual health inflation.

Wait til you see your mandated exchange premium before you think Obamacare is too much pain or not.

Guest
Jul 4, 2013

Rob, I am totally with you on helping low wage workers. Terrible things go on every day in the non-union cheap labor underworld.

However, I cannot follow your assertion that low wage workers are being thrown under the bus by Obama.

They did not have employer health insurance before the ACA.

Under the ACA, a few employers were going to offer mini-med plans, but most were going to send workers to the exchanges and just pay the penalty.

Now there is no penalty for a year. The workers can still go the exchanges.
The government will incur more debt I suspect.

No great change for the workers, though I may have missed something.

Guest
Rob
Jul 4, 2013

Yea, you missed something. Public policy legislation should force all employers to provide health insurance, OR it should go in another direction and provide or subsidize insurance for everyone. I will say this again, why should I as a taxpayer provide a subsidy to the employees of companies that pay low or minimum wage so that those companies can reap higher profits? If the Obama legislation had not given an exemption to companies that in many cases are exploiting their workers, or required a substantial(not trivial)
penalty for not providing medical insurance, these employees would have realized a substantial increase in absolute income, would have had access to the same tax-exemption(or subsidy) that 96% of other workers already are receiving the benefit of, and the taxpayer would not be on the hook for an additional tax subsidy in the form of insurance exchanges. Obama is effectively giving the most exploitive businesses in America a subsidy that taxpayers have to foot the bill for, in order to protect corporate profits(Uwe Rheinhardt’s opinion notwithstanding)

Guest
Jul 4, 2013

Good ponts, but politically why is it so hard for even a Democrat to go after cheap-labor employers?

Is it because even many Democrats would rather have low low prices vs. taking care of workers?

Is it because labor unions are preoccupied with the precarious status of their own members, and ignore unorganized workers? (which has been true for a long time in America?)

Is it because the low wage employers can scare us with actual or proposed layoffs?

Is it because very few Americans appreciate how much money is made by large restaurant chains and similar businesses?

I do not really know the answer.

Guest
Barry Carol
Jul 4, 2013

While there has been a lot of discussion about companies that offer health insurance to their employees vs. those who don’t, I haven’t seen any good data on how many employees work for firms that offer insurance that falls short of the ACA’s essential benefit mandate including comparatively modest deductibles. I’m sure there are plenty of employers that will have to beef up their coverage at considerable cost which will get reflected in a combination of higher required employee contributions and smaller raises or none at all vs. what would have been provided in the absence of higher health insurance costs. The price of their products and services will presumably also rise to reflect the higher health insurance costs.

People should also think about the implications of what it would take to bring comprehensive health insurance to the restaurant industry which has millions of low paid workers. For a typical chain restaurant, about one-third of the revenue dollar goes to pay for the actual food and beverages. Another 10%-15% goes for rent and most of the rest is for labor and benefits including tips paid by customers on top of the menu price.

If you go to an ordinary restaurant in a large Western European city, you will find that a typical meal costs two to three times what it does in the U.S. It’s not uncommon for a burger, fries and a soda to cost $30 or more in the equivalent of a diner. How many fewer restaurants and how many fewer restaurant workers do you think there would be in the U.S. if menu prices suddenly doubled or more? Workers who still have jobs would make considerably more money and would have good health insurance but there would be a lot fewer of them. Everything in life is a tradeoff.

Finally, as for implementing a health insurance system paid for by taxes, Americans just wouldn’t tolerate the level of taxation needed to do that. It’s as simple as that. Moreover, since prices per medical service, test, procedure and brand name drug are significantly higher in the U.S. than in other developed countries, even a single payer system would not be as effective as advocates suggest in reducing costs. A recent article in the New York Times that described the very high cost of intensive treatments delivered to women who are pregnant not only showed that pregnancies cost far more in the U.S. than elsewhere but that even Medicaid which is notorious for paying very low prices for care pays an average of over $9,000 for a routine pregnancy and delivery compared to about $4,000 in the next most expensive countries. Go figure.

Guest
Doctor Mawrdough
Jul 4, 2013

How is it that Congress passed a law and the POTUS can alter its implementation?

That asked, I think you have omitted an essential component of the delay. The POTUS has had an epiphany. The financial projections the White House and Congress used to pay for Obamacare are flawed, because so much of it was to come from the savings from using HIT (and we now know that such is not happening).

Costs of care and outcomes of care have not improved when HIT is deployed. Sorry to let you know the facts.

Guest
Tb
Jul 7, 2013

Congress does not control implementation of laws. That is left to the executive branch to “execute.” This is not some hidden scandal if that’s the point you’re trying to make.