Businesses applaud delay in healthcare mandate

Posted Wednesday, Jul. 03, 2013  comments  Print Reprints

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One day after the Obama administration delayed the Affordable Care Act’s employer mandate until 2015, critics and supporters of the legislation were hotly debating the cost and effects of the surprise move while business owners breathed a sigh of relief.

The law required companies with more than 50 full-time employees to provide health coverage in 2014 or face fines of $2,000 per worker.

Now, business operators like Grady Payne of Fort Worth and Zach Davis of Santa Cruz, Calif., will have an extra year to ponder their next moves. With that, employers may be more comfortable that they’re making an informed decision rather than taking a chance on legislation that is still unfolding more than three years after passing.

Payne, CEO of Conner Industries, where about 550 employees make wooden crates and packing material, had been working on three healthcare benefit options to meet the law’s mandates. The company currently provides health benefits to about 100 administrative workers.

“The law is so complex, we still don’t know exactly what all this will cost and what coverage the company will offer,” he said.

It has been hard to get firm quotes from insurers, Payne said, because the law has so many unknowns, such as how many of his now-uncovered workers will opt for coverage.

“They’re not going to pay the $30 a week or so that would represent their share of the premium payments on a policy that has a sizable deductible before coverage kicks in,” Payne said.

Although Davis’ restaurant and ice cream shop isn’t subject to the mandate because most of his employees work part time, he had been considering expanding his employee coverage through the health insurance exchanges that are scheduled to come on line in October.

“If I had all the information about what the exchanges would do for us in front of me right now, that would be great and I would probably be prepared, as we move toward our [health plan] renewal date, to take that into account,” Davis said.

“But given that we might not get that [health plan cost] information until August or September, it makes the window pretty small and it definitely increases the likelihood that we’ll just renew with what we have, see how things shake out with the exchanges and then be in a position to make a really good decision come the end of 2014.”

While Beltway lawmakers and stakeholders were surprised by the postponement, Davis, 37, said he wasn’t.

“At this point, with so many things still up the air this late in the game, it doesn’t shock me that something had to be delayed,” he said.

The delay is the second this year to significantly affect the rollout of the Affordable Care Act. In the spring, the Obama administration said small businesses that want to offer employee coverage through the exchanges will be able to select only one plan in the 34 states where the marketplaces are run by the federal government.

Tuesday’s decision will be costly.

The Congressional Budget Office estimates that the government will lose $10 billion in employer penalties in 2015 because of the delayed enforcement. Likewise, many expect that federal outlays to help low- and moderate-income people buy coverage will grow since employers will no longer have to provide coverage next year.

“At a minimum, the federal revenue from fines is gone. More realistically, the costs of already bloated insurance subsidies will escalate and the red ink will rise,” said Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank.

Jon Gruber, an economist at the Massachusetts Institute of Technology who helped design the federal health law, said the decision to forgo the $10 billion in penalties is both pragmatic and political.

“Basically, it was their judgment that it was causing too many logistical and political headaches and it wasn’t that essential to the law, so they decided to just delay it a year and live with the revenue loss,” Gruber said Wednesday.

Obama officials said as much Tuesday when they announced plans to “revamp and simplify” the process of reporting the status of employee coverage and calculating appropriate penalties.

“We will convene employers, insurers and experts to propose a smarter system and, in the interim, suspend reporting for 2014,” White House special adviser Valerie Jarrett said.

But Roger Feldman, the Blue Cross professor in health insurance at the University of Minnesota, disagrees.

“The regulations were quite complicated and it certainly was difficult to calculate the number of full-time employees and how employers were going to be penalized, but I don’t see that as the real reason. I see this as just caving in to a demand from industry,” Feldman said. “I think the computer problems are just a way to explain it. The real reason is you got strong push-back.”

On Wednesday, Rich Umbdenstock, president of the American Hospital Association, called the delay “troubling” for people who will lose employer coverage because of it.

“We are concerned that the delay further erodes the coverage that was envisioned as part of the ACA,” Umbdenstock said in a statement. Because the mandate won’t be enforced, he called on the Obama administration to issue a two-year delay on funding cuts to hospitals that serve high numbers of uninsured people.

But Judy Solomon of the left-leaning Center on Budget and Policy Priorities said the delay shouldn’t severely affect coverage. The people it causes to lose job-based care will still be eligible for subsidies to help buy coverage in the exchanges, she said.

“The goal of health reform is to provide coverage for all Americans — whether through Medicaid, private plans in the marketplace, or employer coverage. Nothing in yesterday’s announcement puts a roadblock in these pathways,” Solomon said.

Michael Parks, managing director of financial services at the Fort Worth-based insurance broker Higginbotham & Associates, said that while most businesses don’t face too many issues complying with the law, those that do have significant problems.

“There are still so many question marks” surrounding costs and how employees will respond to new coverage options, so plenty of employers are still undecided about how to comply, Parks said.

He said many businesses didn’t spend enough time preparing, thinking that the Supreme Court or a changed Congress might alter or scuttle the law. The lesson, he said, is to take advantage of the delay by working to understand the law.

“Our recommendation is, don’t wait a year. Start working on it now,” Parks said.

But Payne, sounding a familiar Republican narrative, said he hopes the delay becomes permanent. “I’d like to see it repealed,” he said.

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