The Obama administration’s plan to delay a health insurance requirement for large employers comes as a relief for businesses grappling with the new law, but the lag won’t have a dramatic effect on the overall expansion of health care coverage, business and health care experts in Connecticut say.
Opponents of the law say the delay doesn’t go far enough and underscores weaknesses in the underlying act, while supporters say it’s a wise show of flexibility.
The delay of the employer mandate also strips the business community of a major complaint against the Obama administration and its Democratic allies during 2014, an election year.
The Affordable Care Act’s “employer mandate” was to go into effect on Jan. 1, 2014. Now it will start a year later.
Mark Mazur, assistant treasury secretary for tax policy, said in a blog post Tuesday that the Internal Revenue Service is responding to “concerns about the complexity of the requirements and the need for more time to implement them effectively.”
Under the employer mandate, businesses with 50 or more employees would have to cover all workers or pay a fee of $2,000 for all but the first 30 uninsured employees.
Since the requirement has been postponed, large businesses could potentially drop insurance coverage without a penalty, forcing employees to purchase insurance on their own or pay a fine when the health law’s individual mandate takes effect Jan. 1. The delay also means the federal government won’t collect the $4 billion in penalties employers had been projected to pay next year, which would have gone to subsidize insurance costs for people buying their own coverage.
The delay doesn’t affect the other major provisions of the law aimed at getting more people health insurance — expanding Medicaid eligibility and creating new state-level marketplaces for individuals and small businesses to buy insurance, often at discounted rates subsidized by the federal government.
“From a coverage perspective, it’s a fairly small impact,” said Kevin Counihan, CEO of Access Health CT, the state’s new insurance marketplace, known as an exchange. “From a numbers perspective, it’s actually not significant. But I think it’s the optics that are probably not so hot.”
But Ellen Andrews, executive director of the Connecticut Health Policy Project, said the decision to postpone the employer mandate will “put a lot of pressure on the individual mandate.”
While employers won’t have an incentive to begin covering their workers, Andrews said, their workers will have to purchase insurance next year or pay a fine.
“They are giving the employers a bye, but nobody is giving individuals a bye,” she said.
The vast majority of large employers already provide health insurance to their workers.
But Joseph McGee, vice president for public policy and programs at The Business Council of Fairfield County, said many businesses are still trying to understand how the law will affect them. There are questions about what makes a business subject to the mandate, particularly if it has multiple locations.
Many of those questions came up during a meeting the council hosted last week with representatives of Access Health. Even insurance brokers said they were reluctant to advise their clients because of uncertainties about the law, McGee said.
“There just seemed to be a need for federal guidance to the states about that,” McGee said.
There’s also concern that the reporting requirements for businesses will be onerous, McGee said.
“This is a massive social change with broad implications, and it’s better to err on the side of, ‘Let’s get it right,’ rather than roll out something that’s going to cause an enormous backlash,” McGee said.
The delay also won praise from Andrew Markowski, Connecticut state director of the National Federation of Independent Business, a group that sued to stop the law.
But he said it’s not enough.
“We’ve been saying all along that the law is bad for business, so we’re glad that there’s at least some temporary relief out there, but again, it’s temporary,” he said. “And we need to go back to a top-to-bottom overhaul of the entire law.”
And to Markowski, the delay suggests that the Obama administration recognized the problems the law would pose for businesses.
“It’s just more evidence that the implementation of this law is going to be difficult, if not impossible, and the burden is going to continue to fall on the job creators,” he said.
While many businesses in Connecticut already offer health insurance coverage, the delay will affect businesses “on the cusp,” giving them a chance to determine how the mandate would affect them and how to move forward, said Jennifer Herz, an assistant counsel for the Connecticut Business & Industry Association who specializes in health care.
“If you look at the law in total, there are a lot of new requirements, and all of it together I think is overwhelming to a lot of folks who are really focused on their businesses,” she said.
Counihan, the Access Health CEO, said the delay won’t affect his organization’s efforts, but said it could pose one complication. In general, people who work for large employers and get coverage through their jobs aren’t eligible to buy insurance through the new state-level marketplaces, unless their employer’s coverage costs more than 9.5 percent of their income.
But now employers won’t be required to report any data about their coverage offerings until 2015. So if someone working for a large company tries to buy coverage through the exchange, Counihan said it’s not clear how their eligibility would be determined. He’s expecting federal guidance on how to handle those situations.
Andrews also had concerns about how the lack of reporting could affect people who get “lousy” coverage from their employers, raising questions about whether they would be able to buy coverage through the exchange.
And Counihan said the delay could further complicate an already difficult task of making sure the public understands what’s happening with the law.
“Roughly 40 percent of the country thinks that this law has either been repealed, found to be illegal or is just being delayed or deferred,” he said. “It just adds to that confusion.”
In Washington, where the law commonly known as Obamacare has become a political football, Republicans jumped on the delay of the mandate as proof that the health care law is unworkable.
“White House seems to slowly be admitting what Americans already know … that Obamacare needs to be repealed,” said Senate Minority Leader Mitch McConnell, R-Ky.
Meanwhile Democratic supporters of the law defended the Obama administration’s decision.
“It’s better to do this right than fast,” said Senate Majority Leader Harry Reid, D-Nev.
Rep. Joe Courtney, D-2nd district, called the delay, “a prudent response to legitimate questions raised by small businesses trying to calculate part and full-time employees and their respective health insurance obligations.”
One concern even supporters of the law had about the employer mandate was that companies would cut workers’ hours or rely more heavily on part-time labor to avoid having to comply with the coverage requirement.
Inspired in part by that concern, some Connecticut labor groups and other advocates pushed for state legislation this year that would have required large companies to pay a penalty if their employees receive Medicaid.
The bill didn’t pass, and one of the reasons people with concerns pointed to was that the federal health reform law had so many moving parts, it would be problematic to add a requirement at the state level, too, said Tom Swan, executive director of the Connecticut Citizen Action Group and a supporter of the proposal.
On Wednesday, Swan said he hoped the delay of the federal employer mandate would “help to create a space where we have to have a more substantive debate” about charging large companies that leave their workers to get public coverage.