After Obamacare pay-or-play delay, questions linger

The Affordable Care Act has been a political football since it weaved (critics might say “snaked”) its way through the legislative process more than three years ago. Now, a major part of that law — the employer mandate — has been punted down the road until 2015.

Just before the Fourth of July holiday, the Obama administration dropped a bombshell, delaying the Affordable Care Act’s so-called pay-or-play provision, which had originally been slated to go into effect beginning in 2014, until Jan. 1, 2015.

It was no doubt a welcome reprieve for some in the business community, who were facing reporting requirements and stiff fines for uninsured employees, but it also raised some urgent questions, such as: What are the implications for the law as a whole? And how does this affect my business?

It didn’t take long for advocacy groups to react.

The National Federation of Independent Business (NFIB), whose lawsuit seeking to halt the ACA led to the landmark Supreme Court ruling that ultimately cleared the way for its implementation, said the mandate deserves to be scrapped entirely, and “moves us in exactly the wrong direction.”

“Delay of the employer mandate for one year, possibly more, does not erase the inherent problems with the employer mandate. It only postpones addressing them,” said NFIB research fellow William J. Dennis Jr. in prepared testimony before the House Ways and Means Committee, Health Subcommittee a week after the announcement. “Already we have seen employers reduce or announce reduction in hours to escape the mandate.”

Dennis also noted that the delay raises several uncomfortable questions for the administration — questions that are likely top of mind for many in the business community.

“When you are ill prepared, the wise thing to do typically is to delay, postpone, or even cancel. The administration’s one-year delay in the employer mandate somewhat improves a bad situation, despite raising such questions as: How will the delay affect business confidence? Will the administration be ready in another year? Why was the administration so ill prepared in the first place?”

Republicans in Congress also weighed in, using the opportunity to launch fresh criticisms of the law and to push for a vote on delaying the politically contentious individual mandate, which requires individuals to purchase health insurance or pay a tax penalty.

As one House Republican leadership aid told Fox News, “There is a lot of enthusiasm among House Republicans for voting to give individuals and families the same protection from this awful law.”

On the other side of the aisle stood the law’s proponents, as well as the administration itself.

The Small Business Majority, a business advocacy group, noted that since the employer mandate affects only employers with more than 50 employees, the fallout from the delay will be negligible, and implied that the worries about the delay’s repercussions are vastly overblown.

“Ninety-six percent of businesses in this country have fewer than 50 employees. For these employers, nothing changes because they were already exempt from the employer responsibility requirements,” stated Terry Gardiner, vice president of policy and strategy for the Small Business Majority, in a press release. “For larger businesses with more than 50 employees, 96 percent already offer insurance and we believe will continue to for business reasons. Only the 4 percent of larger employers that do not offer health insurance will be impacted by the delay in the penalty.”

Gardiner also noted that many of the provisions affecting small businesses are still moving ahead.

“The [health care] exchanges, coming online on Jan. 1, 2014, will allow small businesses to pool their buying power to help drive down coverage costs,” stated Gardiner. “Additionally, small employers that do offer coverage will be eligible for a tax credit of up to 50 percent of their premiums.”

Changes and exchanges

Barbara Zabawa, an attorney with Whyte Hirschboeck Dudek’s Madison office and the leader of the firm’s Health Care Team, said the delay could have a substantial effect if employees decide they like the coverage they get through government health care exchanges and opt out of employer-based coverage in the future. Since the health exchanges are scheduled to go forward as planned, employees will have a full year of experience with them before the employer mandate kicks in.

“The delay in the mandate will give time to those employees to become accustomed to purchasing coverage outside of an employer-based arena, and those preferences will be developed over the next year and perhaps may impact expectations in the marketplace around employer-based coverage,” said Zabawa.

(Continued)

That wouldn’t necessarily be a bad thing, according to Zabawa. After all, she says, if the delay helps demonstrate that the exchanges work, the government ought to take that into consideration.

“I would hope that if the outcome of this delay is more preference for purchasing coverage by individuals through a marketplace as opposed to obtaining it through an employer-based system that policymakers would recognize that preference and perhaps amend the act to accommodate those preferences,” said Zabawa. “Because to force people into doing something they don’t want to do — that’s sort of the premise of all the objections to the Affordable Care Act in the first place — but if people are driving to the whole notion of having insurance coverage and they develop a preference toward obtaining it on their own, as opposed to through their employer — I don’t know that that will be the case, but it’s a possibility — then employers will be off the hook for providing coverage.”

Good listeners?

When the Obama administration announced the delay, it said it had listened to the business community, particularly with regard to the complexity of the law’s reporting requirements.

“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,” stated Mark J. Mazur, assistant secretary for tax policy at the U.S. Department of the Treasury. “We have listened to your feedback, and we are taking action.”

According to Zabawa, the sense of relief that some companies feel right now may include a glimmer of hope that the administration will show more flexibility in the future.

“Nobody’s told me this, but just from my experience speaking to these groups, there may be some hope that there will be a greater change to this provision,” said Zabawa.

Up until now, says Zabawa, there’s been considerable frustration with the Obama administration when it came to addressing businesses’ concerns.

“Yes, the theme has been that the Department of Health and Human Services hasn’t really been listening or paying attention, has been moving very slowly and having a lot of unanswered questions lingering out there,” said Zabawa. “So I guess it’s refreshing in a way to see the message from the Department of Treasury that ‘we’ve listened and we’ve talked to all these groups and now here’s what we’re going to do.’”

According to Todd Cleary, a shareholder in Godfrey & Kahn’s Employee Benefits Practice Group, there were still a number of businesses that didn’t yet have their arms around the mandate and were unsure how to proceed. That said, he thinks the complexity of the mandate and the difficulty in complying have been somewhat overplayed for political effect.

“I’m not convinced that’s the case [that it has been difficult to comply],” said Cleary. “For a lot of businesses, that might be true, and if that’s true I think it would be more true of the employers who are trying to figure out whether they’re actually subject to the mandate, because to me those rules can be complicated, or very complicated if you’re an employer who’s kind of on the cusp of 50 full-time employees and full-time employee equivalents. That can be a challenge to count those employees and figure out which side of the ledger you’re going to be on in terms of the application of the mandate. But I think for employers that knew for sure that they were going to be subject to the mandate, I’m not convinced that getting yourselves into compliance was excessively onerous.”

Still, Cleary notes that to many employers, the Obama administration’s recent announcement comes as very welcome news.

“I think it’s just the sense of relief that, thankfully, we’ve got another year to not have to worry about it,” said Cleary. “And my comment about the mandate really not being as complex as it’s been played up to be, that comment notwithstanding, there are still some gray areas in the law that employers have been battling with, and this extra time I think gives the regulators more time to come out with concrete guidance to address these open questions, which is going to benefit everybody.”

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