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White House delays health insurance mandate for medium-sized employers until 2016 White House delays health insurance mandate for medium-sized employers until 2016
(about 4 hours later)
The Obama administration announced Monday it would give medium-sized employers an extra year, until 2016, before they must offer health insurance to their full-time workers. For the second time in a year, the Obama administration is giving certain employers extra time before they must offer health insurance to almost all their full-time workers.
Firms with at least 100 employees will have to start offering this coverage in 2015. Under new rules announced Monday by Treasury Department officials, employers with 50 to 99 workers will be given until 2016 — two years longer than originally envisioned under the Affordable Care Act — before they risk a federal penalty for not complying.
By offering an unexpected grace period to businesses with between 50 and 99 employees, administration officials are hoping to defuse another potential controversy involving the 2010 health-care law, which has become central to Republicans’ campaign to make political gains in this year’s midterm election. Companies with 100 workers or more are getting a different kind of one-year grace period. Instead of being required in 2015 to offer coverage to 95 percent of full-time workers, these bigger employers can avoid a fine by offering insurance to 70 percent of them next year.
Even the nation’s largest employers got a significant concession: They can avoid a fine by offering coverage to 70 percent of their full-time employees in 2015 and 95 percent starting in 2016. Under an earlier proposal, employers with at least 50 employees would have been required to offer insurance, beginning 2015, to 95 percent of those who work 30 hours or more a week, along with their dependents. How the administration would define employer requirements has been one of the biggest remaining questions about the way the 2010 health-care law will work in practice — and has sparked considerable lobbying. By providing the dual phase-ins for employers of different sizes, administration officials have sought to lighten the burden on the small share of affected employers that have not offered insurance in the past.
The regulation finalized by the Treasury Department involves one of the biggest issues surrounding the Affordable Care Act: how the law’s employer mandate plays out in practice. The mandate has enormous ramifications for how businesses classify their employees and how much these men and women work. As word of the delays spread Monday, many across the ideological spectrum viewed them as an effort by the White House to defuse another health-care controversy before the fall midterm elections. The new postponements won over part, but not all, of the business community. And they caught consumer advocates, usually reliable White House allies, by surprise, particularly because administration officials had already announced in July that the employer requirements would be postponed from this year until 2015.
Initially, these requirements — which affect firms employing 72 percent of all Americans — were supposed to take effect this year, at the same time that most individuals faced a new obligation to obtain health insurance or risk a tax penalty. Last July, the administration announced it would delay the regulation for a year after many employers and some unions complained about the law’s reporting requirements and classification system for workers. Congressional Republicans seized on the announcement as the latest justification for scrapping the health-care law. In particular, they renewed their opposition to the law’s requirement that most Americans have insurance, saying it is unfair to delay rules for businesses and not for individuals.
A senior administration official, who briefed reporters on the proposal on the condition of anonymity because the rule was not yet public, said the Treasury Department decided to allow medium-sized businesses more flexibility because they “need a little more time to adjust to providing coverage.” “If unilateral delays were an Olympic sport, the White House would sweep the gold, silver, and bronze,” House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said in a statement. “The White House is in full panic mode, and rather than putting politics ahead of the public, it is time for fairness for all.”
Businesses that fail to offer coverage face a fine of up to $2,000 for each employee that is not covered, though workers are not required to sign up for the benefits. Originally, the employer mandate — which affects companies employing 72 percent of all Americans — was to have gone into effect Jan. 1, at the same time the law began requiring most Americans to have health insurance.
The coverage must encompass a core set of benefits and be affordable — which the law defines as premiums costing no more than 9.5 percent of an employee’s income — and the employer must pay for the equivalent of 60 percent of the cost of coverage for workers but not their dependents. A senior administration official, who briefed reporters on the proposal on the condition of anonymity shortly before the rule became public, said the Treasury Department decided to allow medium-size businesses more latitude because they “need a little more time to adjust to providing coverage.”
Until now, the government had not defined exactly which workers should be considered full-time. Nor had it spelled out important details of the insurance benefits that employer-sponsored health plans must cover, given that they are not the same as the “essential benefits” required of health plans that are sold to individuals or small businesses through the new federal insurance exchange, HealthCare.gov. The law says that anyone who works 30 hours or more is a full-time employee, and it compels many employers to offer affordable insurance to those workers and their dependents. It defines affordable as premiums of no more than 9.5 percent of an employee’s income, and employers must pay for the equivalent of 60 percent of the actuarial value of a worker’s coverage. Businesses that fail to do so will eventually face a fine of up to $2,000 for each employee not offered coverage, though workers are not required to sign up for the benefits.
Brian Haile, senior vice president for health care policy at Jackson Hewitt, said the announcement was significant because how the federal government defines a full-time employee will affect hiring decisions across the country. Under the health-care law, small employers — those with fewer than 50 workers — do not have to offer insurance. Instead, they will be allowed to buy health plans through new marketplaces created under the law. Because of hardware and software problems, the federal small-business marketplace, which was supposed to open in October, will not become available until the fall.
“This final rule may seem like an obscure accounting matter, but it gets to the heart of whether and how employers hire new workers — and whether these workers will have the opportunity to transition from part-time to full-time or seasonal to permanent employment,” Haile said. “This rule hits on a core question as to how employment is structured in the United States.” But until now, the government had not spelled out important details. Nor had it defined exactly what insurance benefits must be covered by employer-sponsored health plans.
Administration officials said that organizations with a large number of volunteer employees — such as firefighters and first responders — would not have to provide coverage, along with those hiring seasonal employers who work six months or less in a given year. Administration officials said Monday that they will issue a separate set of rules in coming weeks that will cover related questions about how employers must report their workers’ insurance status to the government.
Teachers will not be considered part-time just because they do not work for three months during the summer, officials added, while the status of adjunct faculty will be calculated on a formula where they would receive credit for 2¼ hours of service per week for each hour they spent teaching or in the classroom. Trade associations — which represent many of the U.S. businesses affected by the new requirements — had a mixed reaction to the rule.
The National Restaurant Association, whose nearly 500,000 members were concerned because many industry employees work odd schedules and do not receive benefits, lauded the phase-in. “It’s welcome news, as is anything that helps employers figure this out and gives them time to comply,” said the group’s director of labor and workforce policy, Michelle Neblett, who noted that many members do not yet have systems in place to keep track of worker hours.
But Joe Trauger, the National Association of Manufacturers’ vice president of human resources policy, said businesses will still face massive new compliance costs under the law. “What they’ve released is doing what they can to make some things that are not great policy more livable,” Trauger said. “But at the end of the day, it’s not great policy.”
Ron Pollack, executive director of the consumer lobby Families USA and an ally of the administration, said he was “very surprised” by the new postponements. He contended that, because most large employers already offer insurance, the law’s requirements are not that burdensome. But Pollack added that for workers at large companies that do not provide coverage, “it’s very unfortunate . . . that they don’t have a guarantee it will be extended to them for quite some time.”
Senior administration officials said the latest postponement will have little real-world impact, because the vast majority of employers have fewer than 50 workers.
But employees of bigger companies represent a much larger fraction of the U.S. workforce, with more than seven in 10 at companies and other organizations that employ 100 or more people.
The extra time before certain employers must offer insurance is among a variety of specifics that Treasury Department officials spelled out for the first time in the final rule they issued late Monday afternoon. Each addressed an issue that, while narrow, had become controversial among certain constituencies.
For instance, the rule pleased fire companies, which had feared that the government might have required them to offer insurance to volunteer firefighters and other first responders. The rule also said that educators who have summers off are nonetheless to be treated as full-time workers entitled to be offered coverage. Adjunct faculty members will be counted as working 2.25 hours for ever hour in the classroom. And the rule said that seasonal workers — such as farm workers or extra department-store hires around Christmastime — are considered full time only if they work for at least half the year.
Sandhya Somashekhar and Ed O’Keefe contributed to this report.
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