What now? Delay raises questions about health reform law

Phil Castle, The Business Times

While companies with the equivalent of 50 or more full-time employees now have another year to comply with the so-called “employer mandate” to offer health insurance or pay fines, delays in implementing federal health care laws also raise concerns about continued uncertainty surrounding the law.

What’s been announced as a delay in a implementing a key provision of federal health care law gives some businesses another year to prepare for requirements they offer insurance to employees or pay fines.

While it applies only to businesses with the equivalent of 50 or more full-time employees, the delay also could prolong what’s been described as a more general regulatory uncertainty that’s discouraged even smaller firms from expanding operations and hiring additional staff. Could other provisions of the law be delayed? Will health care exchanges scheduled to open in October offer lower premiums? And even if businesses ultimately offer their employees insurance under the Patient and Affordable Care Act, how long will they keep doing so?

“It might just kick the can down the road,” said Diane Schwenke, president and chief executive officer of the Grand Junction Area Chamber of Commerce.

Mark Mazur, an assistant secretary in the Department of the Treasury, announced in a July 2 blog on the department website the Obama administration will postpone enforcement of the so-called “employer mandate” until 2015. Under that provision, businesses with 50 or more full-time employees must provide health insurance or pay fines that could run as high as $3,000 per employee.

In his blog, Mazur characterized the delay as a response to concerns from businesses over the complexity of new employer and insurer reporting requirements. “We have listened to your feedback. And we are taking action,” he stated.

Valerie Jarrett, a senior advisor to President Barack Obama, stated in a separate blog posted on the White house website the delay is needed to simplify the reporting process and give businesses more time to comply. Since fines can only be assessed based on reporting, they won’t be collected for 2014. That way, employers can test reporting systems as well as change health care coverage, Jarrett said.

Tony Gagliardi
Tony Gagliardi

Tony Gagliardi, state director for the National Federation of Independent Business in Colorado, said the delay affects only a slim proportion of the firms that belong to the small business advocacy group. And he’s pleased those businesses with 50 or more employees won’t face the requirements for another year.

Nonetheless, the fact a delay was required in implementing health care reforms constitutes something else, Gagliardi said: “It’s an indicator of the train wreck we all could be headed for.”

The NFIB was the lead plaintiff in a case before the Supreme Court last year, joining 26 states in arguing against the constitutionality of another provision of the Affordable Care Act — the individual mandate that requires the purchase of health insurance or the payment of a penalty. The Supreme Court upheld most of the provisions. Writing for a 5-4 majority, Chief Justice John Roberts rejected the individual mandate as unconstitutional, but also affirmed congressional authority to levy and collect what he characterized as taxes on people who don’t purchase insurance. The individual mandate is scheduled to take effect in January.

Gagliardi attributed the delay in implementing the employer mandate in part to politics: The fact the provisions won’t be enforced until after the mid-term elections in 2014 isn’t a coincidence.

Meanwhile, the delay prolongs uncertainty over the full effects of the health care law on businesses, in turn delaying decisions to expand operations or hire additional employees, he added.

Chris West

Chris West — a principal at the Dalby, Wendland & Co. accounting firm based in Grand Junction — said he considers the delay a “good thing” for businesses struggling to determine how to comply with the employee mandate.

Postponing the requirements should offer time to simplify the process and develop computer software that will help, West said.

Other provisions of the Affordable Care Act remain in place, though, including not only the individual mandate but also a 3.8 percent Medicare surtax on investment income for taxpayers above certain thresholds, he added.

Many businesses that employ more than 50 people and offer health insurance likely will continue to do so as a benefit that keeps employees happy and productive, West said.

But some of those businesses whose staffs approach the minimum at which the employer mandate kicks are contemplating changes to either stay or slip below the limit, he said. For certain service-oriented companies that employ more than 50 people and don’t offer insurance, the potential costs could be substantial, he added.

Meanwhile, there are still other businesses and individuals that remain in a “state of denial” about enforcement of the federal health care law, West said.

Diane Schwenke
Diane Schwenke

Schwenke agreed that uncertainty remains one of the biggest challenges related to federal health care reforms.

Since most of the businesses that belong to the Grand Junction chamber employ fewer than 50 workers, a delay in implementing the employer mandate won’t pose a huge effect on members, Schwenke said. And those businesses that are affected will have more time to evaluate their positions, she added.

Nonetheless, the Affordable Care Act has made the owners and managers businesses of all sizes uneasy, she said. “There’s just a lot of angst in the business world.”

According to the latest results of a chamber membership survey, most business owners and managers expect to continue to offer health insurance to employees under the provisions of new federal law.

In fact, 63 percent of those responding to the survey indicated they’re likely to continue to provide coverage when enrollment begins Oct. 1 in a new health benefits exchange in Colorado.

Another 16 percent said they’re “somewhat likely” to offer coverage,  while yet another 16 percent said they’re “unlikely” to provide coverage.

The issue for businesses then, Schwenke said, is whether the health exchange will lower or drive up insurance premiums. “That’s the big question for a lot of them.”

The continued willingness of businesses to offer insurance to employees could depend on the answer, she added.

While businesses might offer insurance while they calculate the costs to their operations, circumstances could change after a year, she said.