What the health law delay means to businesses

A one-year delay in a central part of the health care overhaul is likely to have its biggest impact on small and medium-sized businesses, not the number of people who will be gain health insurance coverage.

The Obama administration said Tuesday that it would postpone until Jan. 1, 2015, the effective date of what’s called the employer mandate portion of the Affordable Care Act. The law had required companies with 50 or more employees to provide affordable health coverage for their workers as of Jan. 1, 2014.

That provision affects by some estimates just 4 percent of the nation’s more than 27 million companies. And many of those companies are already providing insurance to their workers.

Other provisions of the ACA, including the creation of state and federal health insurance exchanges, remain on schedule. Those exchanges are where individuals and small and medium-size businesses will be able to purchase health care policies.

Treasury Assistant Secretary Mark Mazur said in a blog post that the government was responding to complaints about the law, which has many regulations and rules for businesses to follow.

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mazur said.

Some questions and answers about the impact of the delay:

Q. How does Tuesday’s announcement affect the number of people who gain coverage under the law?

A. It shouldn’t have a big impact. Congressional Budget Office forecasts show that most of the people who gain coverage are expected to do so either through an expansion of the state-federal Medicaid program that begins next year or by buying a policy through new health insurance exchanges slated to start operating this fall.  Starting Oct. 1, consumers will be able to access these new online marketplaces to shop for private insurance plans in their communities and use income-based subsidies to help pay the bill.

The employer mandate mainly serves as a way to dissuade large employers from dumping their workers on the exchanges, where federal money might be used to help them buy coverage, Citi analyst Gary Taylor said in a research note, adding that it has little to do with the expansion of coverage.

Plus the mandate is not removed from the law. It’s just delayed a year.

Q. Does this mean that other key provisions of the law also will be delayed?

A. Some major coverage expansions are slated to start next year, and Tuesday’s announcement shouldn’t directly affect them. But it raises questions about whether other delays may be forthcoming.

There has been some speculation that the health insurance exchanges, in particular, could be delayed.

A report released last month by the congressional Government Accountability Office said it could not determine whether the exchanges will get off to a smooth and timely start.

Q. How does Tuesday’s decision affect big companies or large employers?

A. Under the health law, companies with 50 or more workers must provide affordable coverage to their full-time employees or risk a series of escalating tax penalties if just one worker ends up getting government-subsidized insurance. That’s the requirement that is now delayed until 2015.

Most medium-sized and large businesses already offer health insurance. Ninety-eight percent of all companies with at least 200 workers provided health benefits to their employees last year, according to an annual survey done by the Kaiser Family Foundation and Health Research & Educational Trust. Ninety-four percent of companies with 50 to 199 employees provided health benefits.

The mandate was expected to have the biggest consequences for major chain hotels, restaurants and retail stores that employ many low-wage workers. Some had threatened to cut workers’ hours, and others said they were putting off hiring, so those plans may be delayed.    

Q. How are small and medium-size businesses likely to react to the one-year delay?

A. It’s fair to say many are relieved — uncertainty over the costs of health insurance has contributed to their anxiety about their revenue and the economy, and to their reluctance to hire or expand. That’s particularly true of companies that have just under 50 employees and that have been holding off new hires because they don’t want add workers and then be subject to the law.

Small business advocates welcomed the announcement.

“It will give people more time to have an opportunity to do the very complex calculations to comply with the ACA,” said David Burton, general counsel of the National Small Business Association. “Until the insurance companies’ rates are learned, it’s impossible to do the math and figure out whether you’re going to buy insurance.”

But some owners are likely to keep playing it safe, and not start hiring.

“They’re going to think, ‘I have another year of worry about this, so I’m not going to make too many plans,’” says David Lewis, CEO of OperationsInc, a human resources provider and consultant.

But with the economy continuing to show slow growth, many owners may decide that it makes more sense to add staff and build their companies, Lewis says.

Q. What does a business owner with 50 or more workers do now?

A. These owners have a one-year reprieve from having to buy insurance and more time to learn about the law and what their options are. Many are still in the dark about what the law requires.

Clients of Insperity, a provider of human resources services, have been typical of small businesses when it comes to knowledge of the law.

“Forty percent of the questions we’ve gotten were around trying to understand it,” says Craig Hill, president of Insperity’s insurance division. “A lot of small businesses weren’t really focused on this the way they should have been.”

When the exchanges open later this year, owners will get a sense of what coverage will cost under the ACA, at least for 2014. A caveat: Many health insurance experts say the real cost of insurance under the ACA won’t be known until it has been fully implemented for at least an entire year. That’s because premiums reflect the costs of health care that insurers cover.

Still, companies that are already providing insurance can shop on the exchanges for a better deal. And all companies with at least 50 workers can decide whether it’s better for them economically to provide insurance, or, when the law goes into effect, forgo coverage and pay the government a $2,000 per employee penalty.

Q. What should business owners do in the next year?

A. They need to educate themselves and be prepared by the summer of 2014 to start deciding on their strategy for when the ACA is fully implemented. The majority of companies make decisions on health care in the fourth quarter because policies go into effect Jan. 1. They shouldn’t put health care on the back burner for another year.

The issues that owners need to consider include how much coverage to offer, keeping in mind that if it’s not considered affordable under the ACA’s standards, they’ll have to pay a $3,000 fine per employee. But, as with the $2,000 penalty for not providing coverage, some employers may decide it’s cheaper to pay the government than to spend on insurance.

Q. What about companies with fewer than 50 employees?

A. These companies aren’t required to provide health insurance, so the delay doesn’t affect them. But some do provide coverage, and many others that don’t are interested in buying insurance. So they’re likely to look at the price of plans when the exchanges are set up later this year, and decide what type of insurance they want to buy.