It’s certainly hard to keep up with latest developments surrounding the employer mandate provision in the Affordable Care Act (ACA). This provision states that certain employers with 50 or more “full-time equivalent” employees (FTEs) who do not provide affordable health care coverage may be assessed a penalty if at least one full-time employee qualifies for a premium tax credit and uses it to purchase coverage in the health insurance exchange. Additionally, the law requires employers to provide prescribed health coverage while, at the same time, penalizing some employers who may fail to offer what is defined by the law as “affordable” coverage.
It is generally acknowledged that the Obama administration delayed the employer mandate for the second time earlier this year because of the complexity of the provision. (If most businesses took one look at the regulation and knew instinctively that it appeared “unworkable,” why didn’t the bureaucrats?) The Treasury Department’s IRS division, tasked with enforcing the provision, has struggled mightily with developing a rulemaking that isn’t so complex as to be unenforceable.
Through all of this, the Republicans (and the business community) have not let up in their criticism of the ACA in general, and the employer mandate in particular. It now appears that there may have been some surprising folks listening. In a recent Health Affairs blog post, Timothy Jost, a professor at Washington and Lee University School of Law and a long-time advocate of the ACA, wrote that, “Repeal of the employer mandate might, in fact, not be such a bad idea, as long as the current mandate was replaced with a better alternative.”
In a similar vein, the president of the Commonwealth Fund, a liberal foundation promoting better healthcare access, posted his own blog, also questioning whether the employer mandate is “Essential or Dispensable?” He noted that. “…modeling… suggests that when fully implemented in 2016, the employer provisions will increase the number of insured Americans by only a few hundred thousand. The overwhelming proportion of U.S. employers already provides insurance to their employees, and would continue to do so without the penalties in the ACA, the analysts contend.”
This movement may have been kick-started by a research paper titled, “Why Not Just Eliminate the Employer Mandate?” that came out in May of this year from the Urban Institute, a non-partisan, social policy think tank. In the paper’s overview, the authors stated their research found that “… eliminating the employer mandate will not reduce insurance coverage significantly, contrary to its supporters’ expectations. Eliminating it will remove labor market distortions that have troubled employer groups and which would harm some workers. However, new revenue sources will be required to replace that anticipated to be raised by the employer mandate.”
And now, just as support for the employer mandate appears to be wavering, Speaker of the House John Boehner, R-Ohio, announced last week that it is his intent to sue President Obama over his delay of the employer mandate. The claim is that the president had no legal right to change the law by delaying the mandate.
Early rumors about a lawsuit against the president were betting on immigration enforcement as the target, but that may have been too risky politically. So, the speaker released a statement on July 10, saying, “…this isn't about Republicans versus Democrats; it’s about the Legislative Branch versus the Executive Branch, and above all protecting the Constitution.” All of this begs the question, where would it leave the business community if the speaker won the lawsuit?
In the meantime, a close reading of the posts above will tell you that a repeal of the mandate won’t likely come about without some form of a “fix” to replace it. This is, of course, the complicating factor that could ultimately determine how far this initiative may be taken. Although on Capitol Hill there is also an undercurrent of Democrat rumblings that accept the notion that the ACA is flawed and needs work, at this point, nothing we have witnessed in the current political environment leads us to believe a compromise “repeal and replace” for the employer mandate would garner the necessary votes for passage.
If you have paid any attention to government affairs over the years you probably got tired of reading about Association Health Plan legislation long ago. These bills would have permitted trade groups to provide health insurance to their members across state lines with the aim of reducing premium costs for small businesses. While great ideas, these bills passed easily out of the House only to become stalled in the Senate.
Fast forward to 2010, and as the small business community was shut out of the negotiations, we watched dejectedly as Congress passed the Patient Protection and Affordable Care Act (ACA), which quickly became known as Obamacare. We had your attention briefly when AAIA and associations from multiple industries spread the word about the onerous 1099 Reporting provision contained in the Act, and with an enormous grassroots response, had it stripped out of the law.
Our concern now is that with the constant press coverage of Obamacare and the implementation dates seemingly far in the future, healthcare fatigue has set in and anecdotal observations lead many of us in the association world to believe that business owners just aren’t paying attention to what’s coming in 2014.
At this point, it’s worth remembering that the Supreme Court essentially validated the ACA and John Boehner, Speaker of the House, famously stated that, “it’s the law of the land”. That does not mean that AAIA is not part of the efforts to repeal sections of the law—quite the contrary in fact—but businesses should not count on the repeal of ACA as the solution to the upcoming implementation of the law.
A minimal understanding of the ACA, and the subsequent regulations, quickly point to employers who have over 50 employees, but less than 200, as particularly vulnerable to a lack of preparedness come January of 2014. Simply put, if you have less than 50 employees you are excluded from almost all of the ACA, and if a company employs over 200 people they are likely to be self-insured and have a dedicated HR department, which means they are going to be watching this issue pretty carefully. Those in the middle will in fact be caught at the center of ACA.
Why should companies be concerned? In the last few months, the Internal Revenue Service (IRS) and the Department of Health and Human Services (HHS) have finally started to issue the regulations that will implement the ACA, including the proposed rule on Shared Responsibility for Employers Regarding Health Coverage (the employer mandate) and the Essential Health Benefits package (the minimum necessary benefits for a plan to qualify).
These rules were expected to be complicated, and the agencies did not disappoint. For example, the following paragraph is from the IRS’s own Q&A page on the Employers Shared Responsibility, in answer to the question, “How does an employer know whether it employs enough employees to be subject to the provisions?”
To be subject to the Employer Shared Responsibility provisions, an employer must employ at least 50 full-time employees or a combination of full-time and part-time employees that equals at least 50 (for example, 40 full-time employees employed 30 or more hours per week on average plus 20 half-time employees employed 15 hours per week on average are equivalent to 50 full-time employees). Employers will determine each year, based on their current number of employees, whether they will be considered a large employer for the next year. For example, if an employer has at least 50 full-time employees, (including full-time equivalents) for 2013, it will be considered a large employer for 2014.
This doesn’t even delve into the convoluted formulas required to determine if your employee is full-time/part-time, whether your employees’ contribution to premiums triggers a penalty based on the Federal Poverty Rate or the amount of the penalties you could be facing.
The bottom line is that companies, especially those with 50-200 employees, are strongly encouraged to sit down with their accountant and healthcare provider in order to develop a real understanding of the ramifications and compliance requirements associated with the ACA. While AAIA over the next few months will attempt to make resources available for members that will help explain many aspects of the ACA and provide easily accessible links to the regulations, these resources will be no substitute for the Obamacare conversation you need to have with your trusted advisors; hopefully, as soon as possible.
I welcome your call with any questions or comments or e-mail me at email@example.com.