In a shocking development, the Obama Administration announced it will be delaying the controversial employer mandate provision of the Affordable Care Act until 2015. This section has received significant pushback from the business community because it requires businesses with more than 50 full-time equivalents to offer health insurance coverage or face a series of penalties. The delay will give employers another year to figure things out and punts the mandate until after the 2014 election.
Assistant Treasury Secretary Mark Mazur wrote on the department’s website.
“The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. This is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.
He then goes on “within the next week, we will publish formal guidance describing this transition. Just like the Administration’s effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law.“
The business community cheered the ruling but several questions remain and one has to ask how this will affect an American economy that is seeing businesses in certain industries reduce hours to part-time status, lay off workers or freeze hiring all together. This is a major development because the law defines a full-time worker as 30 hours per week compared to the traditional 40.
The uncertainty around the mandate was one of the biggest challenges facing businesses seeing an impact under the pay or play scenario. This buys another year to figure out an appropriate strategy but raises several new questions and the challenge will be educating employees about health insurance exchanges.
According to White House Senior Advisor Valerie Jarrett “open Enrollment on October 1st will be full speed ahead.” and because the individual mandate is still in play there will be numerous unknowns. The Administration claims this delay is because the White House is “listening to small businesses.”
Analysis and Commentary
This is a massive development and will raise numerous additional questions that will keep policy wonks busy for a long time to come. Here are a few initial observations.
First, if employers have no obligation to report coverage then how will the exchanges or the IRS verify claims that coverage is unaffordable or inadequate? The answer is it cannot the first year.
The second question: if more people are freed from the individual mandate requirement because they lack access to affordable employer coverage then will there be fewer Americans purchasing insurance? The answer is likely yes.
This is due to the reporting in the law that requires insurance companies to report to the IRS verification of individuals who purchased coverage. This was also delayed and raises serious questions about whether the lack of an employer mandate will cause a lot more individuals to go to the exchange the first year increasing the cost of the bill or choose not to purchase coverage which defeats the purpose of the bill or lie on their tax form because again there are no reporting requirements for the first year that would hold anyone accountable.
Every way you look at it is bad and according to the CBO the employer penalty would raise $10 billion in 2015, from employers who fail to provide coverage in 2014. This is a major funding mechanism is now taken out of the law for the first year but it will be implemented the following year. How this will effect employers reducing hours to below 30 hours per week and this answer remains to be seen.
Key challenge for policy makers will be determining if the federal government can afford to lose this much revenue early on while simultaneously adding more people receiving subsidies the first year. It is already unknown if we have the necessary funds to make this law happen in the first place because each month the cost goes up.
We will continue to research this and will have answers to these questions and many more updates in the weeks and months ahead and provide you the latest in information you can understand. Check out our show page and follow us on Facebook and Twitter @AmericasCanary for the latest information on this issue.