Does your company have 50 or more full-time employees? Then it will not be required to provide affordable health insurance for those workers next year. On July 2, the Obama administration announced it was postponing the start date of the employer mandate portion of the Affordable Care Act until January 1, 2015.
If you own a small or medium-sized business, you may be breathing a sigh of relief. The decision is seen by many as a concession by the White House – an admission that the health care reforms authorized in the Affordable Care Act present too much to understand too soon. “We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Assistant Treasury Secretary Mark Mazur stated last week.
What are the ramifications of this 1-year delay? In one sense, they are not that significant. In another sense, they are.
Only 3% of U.S. businesses employ more than 50 full-time workers. A Kaiser Family Foundation survey finds – unsurprisingly – that 94% of these big firms already provide health benefits to their workers. (Make that 98% for businesses having 200 or more FTEs.) CNNMoney says that only 70,000 U.S. workplaces don’t offer employee health benefits.
Nothing has changed for businesses with fewer than 50 full-time employees. These employers aren’t required to provide health insurance to workers in 2014.
The individual health insurance requirement for 2014 is still in place: most taxpayers who can’t access employer-sponsored health insurance will have to buy coverage or pay a fine.
So what is really significant about this decision? It represents a crack in the armor of the ACA. While the individual and small business insurance exchanges planned at the state level are still supposed to be up and running for 2014, this delay in implementing a key provision of the law makes business owners and insurers wonder if other postponements lie ahead.
Though the Department of Health and Human Services claims it is on schedule to open insurance exchanges planned for 34 states, it has already missed several deadlines in the process. The White House said in April that small businesses that wanted to buy insurance for workers in 2014 via state exchanges would be presented with multiple coverage options – that was stated in the law. Now, those businesses are only being given one option for coverage until 2015.
The delay is truly significant for some businesses, particularly in terms of hiring.
Retail and service sector businesses (such as franchises, motel/hotel chains and restaurants) hire mostly low-wage workers. Health benefits may be offered to supervisors and managers, but not to those in entry-level positions. Yet under the ACA, you are considered a full-time employee if you work 30 or more hours a week – and many bar, restaurant and hotel employees do.
So recently, we have seen some of these businesses try the “29er” strategy – arranging employee shifts so that no entry-level employee works more than 29 hours a week. Hiring plans and employee morale have been impacted. These larger businesses may have just under (or just over) 50 FTEs on their payrolls, and if they had more than 50 FTEs on the payroll in 2014, they would have had to provide them with federally “qualified” health insurance or pay a $2,000 penalty per employee. Now, such employers have been given a year’s reprieve.
A year’s reprieve – that’s all. The federal government is still urging larger firms to voluntarily comply with the employer mandate portion of the ACA next year. Secretary Mazur claims that “real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.”
Perhaps the Obama administration’s vision of implementing national health care reforms in a few short years was too “blue sky”. It remains to be seen whether the rest of the reforms envisioned for 2014 will occur according to schedule.
About the Independent Financial Advisor
Robert Pagliarini, PhD, CFP®, EA has helped clients across the United States manage, grow, and preserve their wealth for the past 25 years. His goal is to provide comprehensive financial, investment, and tax advice in a way that was honest and ethical. In addition, he is a CFP® Board Ambassador, one of only 50 in the country, and a real fiduciary. In his spare time, he writes personal finance books, finance articles for Forbes and develops email and video financial courses to help educate others. With decades of experience as a financial advisor, the media often calls on him for his expertise. Contact Robert today to learn more about his financial planning services.