After Affordable Care Act reprieve, who benefits in long run?
By Nancy Borkowski and Jerry Haar
The ever-changing implementation schedule for the Affordable Care Act (ACA) has gotten more complicated.
In July, the Obama administration announced that employers with at least 50 employees will have until 2015 before meeting insurance coverage and reporting requirements for full-time status employees or pay nondeductible penalties under ACA.
Those most benefitting from the one-year delay are businesses from industry sectors that normally rely on part-time and seasonal employees, such as tourism, hospitality, agricultural, retail and food service. However, there are also losers: healthcare providers who expected an increased volume of insured patients, taxpayers due to higher federal spending, and employees who must decide whether to purchase health coverage through the states’ insurance exchanges or pay the individual mandate penalty if they don’t qualify under an exemption.
Prior to the mandate postponement, organizations with at least 50 employees were required to provide qualified health insurance coverage for their workforce (94% actually do) or pay a $2,000 penalty for each full-time employee who did not receive coverage.
Economic experts estimate that the remaining 6% represents about 10,000 companies with 50 or more employees not offering health benefits. This equates to approximately 1% of the US workforce. Not a high number, but when you add workers in companies with fewer than 25 employees who report that their employers do not offer insurance plans and large companies that no longer feel obligated to provide their employees with comprehensive health coverage, the affected population becomes significant.
ACA critics predict that to circumvent the mandate’s requirements employers will reduce employees’ weekly hours under the current 30-hour threshold defining full-time status.
It is also anticipated, to remain financially viable, that employers will decrease their overall workforce to control costs associated with the ACA’s employer mandate as noted in a Wall Street Journal article, employers have already begun increasing hires of temporary workers and cutting hours of others in an effort to avoid coverage requirements.
The employer mandate requirement was passed to help achieve one of the goals of the ACA – extend health insurance coverage to the 22.9 million uninsured adults working in the private sector.
However, small businesses as well as large firms find that providing health insurance coverage is cost-prohibitive to remain competitive in the market. This is reflected with a noted drop of private sector employer-based health coverage from 69% of the working population in 2000 to 58% in 2011, according to the Employee Benefits Research Institute.
For employees affected by the one-year delay, an available option is to obtain health coverage through states’ individual insurance exchanges. Under ACA, individuals who purchase insurance through an exchange and whose annual income is less than 400% of the federal poverty level will be eligible for subsidies for health insurance premiums and cost-sharing.
However, this option may result in higher federal spending coupled with less collected revenues. Georgetown University’s Health Policy Institute relates that the employer mandate delay may translate into higher federal spending for these workers’ subsidies that otherwise would have been covered through their employers in 2014.
In addition, federal revenues will be less for 2014 because there will be no employer penalties collected for not offering coverage as originally estimated by the Congressional Budget Office. This lost revenue is estimated at $10 billion for 2014.
To further complicate the employee situation, at the end of 2014 those who purchased their coverage through the exchanges will need to decide either to stay in the individual exchange or switch to employer-sponsored coverage in 2015.
If an employee chooses to continue with an individual policy purchased through the exchange, he or she will lose the subsidy, which only applies to workers without employer coverage.
The decision to delay the employer mandate requirement highlights the fact that the ACA is complex and implementation delays with any of its provisions are far-reaching. The one-year postponement only benefits a few, and the focus needs to remain on achieving the ACA’s goal of covering the uninsured workforce.