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Obama gives employers extra year to provide health insurance

Teresa Tanoos's picture
Obama gives businesses an extra year to provide health insurance to employees

The Obama administration unexpectedly announced Tuesday a one-year delay to employers who were required to offer health insurance to their employees next year or else face fines under the new health care act, also known as Obamacare.

The announcement means that any business with 50 or more employees can now wait until after the 2014 elections to implement the mandate, which is a central requirement of Obamacare that many small businesses have been complaining about for years.

"We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively," Treasury Assistant Secretary, Mark Mazur, wrote in a blog post. "We have listened to your feedback and we are taking action."

The goal is to implement reform in “a careful, thoughtful manner”, according to Mazur, who added that the administration would spend the extra year finding ways to simplify the process.

“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. Within the next week, we will publish formal guidance describing this transition,” said Mazur.

“We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so,” he added.

Businesses are pleased with the news. Randy Johnson, senior vice president of the U.S. Chamber of Commerce, said it was a “pleasant surprise”, adding that there was “no inkling” in advance of the administration's announcement to delay the mandate.

The employer requirements in the mandate are among the most complex parts of the new federal health care law, which is designed to expand coverage for uninsured Americans, so it’s no surprise that the delay is welcomed by business groups.

"We commend the administration's wise move," said Neil Trautwein, a vice president of the National Retail Federation. It "will provide employers and businesses more time to update their health care coverage without threat of arbitrary punishment."

However, the one-year delay may also weaken Obamacare’s goal in chief: to provide coverage to the nearly 50 million Americans who currently do not have health insurance. There’s already Republican resistance in the states, which will deny access to a planned Medicaid expansion to millions with low incomes until at least next year.

Under the mandate, companies must provide affordable coverage to full-time employees or else face a series of escalating tax penalties, even if only one worker ends up getting government-subsidized insurance. Initially, that requirement was scheduled to take effect on January 1, 2014, but it will now be delayed until 2015.

The U.S. Chamber of Commerce opposes the mandate, saying it has discouraged hiring.

“Employers want to offer health insurance to their employees and want to continue to grow and create jobs. However, the employer mandate threatens to penalize businesses for failing to offer affordable coverage, when—more than ever—people need jobs and employers need help growing and should be encouraged to hire more employees. This law does the opposite at a dangerous time,” the Chamber says.

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“Second, the employer mandate penalty, once triggered, is calculated based on the number of full-time employees,” the Chamber said in a statement. “Further, for the first time, this new law defines a full-time employee as someone who works 30 hours per week, averaged over the course of a month, rather than the traditional definition of 40 hours per week.”

Today, the Chamber’s President and CEO, Thomas J. Donohue, issued a statement regarding the Obama Administration’s decision to postpone implementation of the employer mandate by one year:

“Since the beginning of the health reform debate the U.S. Chamber has consistently stated the employer mandate and other burdensome provisions of Obamacare would be harmful to job creation and economic growth. The Administration's decision to recognize this fact yesterday and delay the implementation of the employer mandate is welcomed by the business community and will help avoid some serious near-term economic consequences of this law. As we move forward, the Chamber will continue to work with the Administration and lawmakers to mitigate potential problems associated with Obamacare implementation.”

Over 160,000 Americans – half of the nation’s population – get their health insurance through an employer, which was a voluntary perk until the new health law.

The Kaiser Family Foundation and the Health Research and Educational Trust found that 98 percent of businesses with 200 or more employees offered health insurance in 2009. However, only 59 percent of employers with three to 199 workers offered it – same goes for only 46 percent of employers with less than 10 workers.

The reason for the decline in employee coverage is largely due to skyrocketing costs for health insurance premiums, which went from an average $2,196 for a single individual in 1999 to $4,824 in 2009. As Kaiser found, that rate increase far exceeds the growth of wages or inflation. Consequently, approximately 13 percent of full-time workers had no health insurance whatsoever in 2009.

Will Obamacare be ready by Oct. 1?

This isn’t the first time an administration has tried to require that employers provide health insurance to their workers. The administrations of Richard Nixon and Bill Clinton both tried to propose a mandate, only for opponents in Congress to block its passage.

So why is the current administration now offering to delay the mandate for a year? Dr. Scott Gottleib, a health policy analyst at the American Enterprise Institute, says it may be because Obama is worried that the mandate would hurt jobs.

"Now fewer businesses will feel compelled to start offering coverage next year. So their employees will face a choice: be forced to go into the Obamacare exchanges or be subject to the new tax," Gottleib wrote in a commentary in Forbes.

Republicans called the one-year delay “a validation” of their belief that the law is unworkable and should be repealed.

"Obamacare costs too much and it isn't working the way the administration promised," said Senate Republican leader Mitch McConnell. "The White House seems to slowly be admitting what Americans already know ... that Obamacare needs to be repealed and replaced with common-sense reforms that actually lower costs for Americans."

Read more: Obamacare could double or triple health insurance rates

SOURCES: 1. U.S. Chamber of Commerce, Press Release: "U.S. Chamber’s Donohue Comments on Obama Administration’s Delay of Employer Mandate" (July 3, 2013). 2. U.S. Chamber of Commerce, "Health Care Solutions from America's Business Community: The Path Forward for U.S. Health Reform" (Report.pdf). 3. Kaiser Health News, "Employers To Get An Extra Year To Implement Health Law Requirement On Coverage" (July 2, 2013).