The administration has announced that employers with more than 50 employees will not be required to offer insurance to their employees until 2015.
Originally, reform legislation said that these employers would have to offer affordable, comprehensive insurance next year—or face penalties of $2,000 to $3,000 per worker
Proof that Obamacare is Not Working?
Without missing a beat, Republicans have stepped forward to say that the delay is evidence that Obamacare is faililng.
What they apparently doesn’t know (or doesn’t want you to realize) is that a delay in the employer mandate will affect only a fraction of employers, and very few employees
First, the majority of large companies already offer health insurance that includes the benefits that the Affordable Care Act labels “essential.” (The only exceptions tend to be large restaurant and retail chains)
The mandate will have the biggest impact on small companies that today, may offer insurance, but often don’t provide “comprehensive” coverage. The postponement means that these firms will have another year to think about whether they want to expand coverage—or pay a penalty,
But their employees will not be hurt by the delay. If either a restaurant chain or a small firm doesn’t offer benefits next year, both full-time and part-time workers be able to buy their own coverage in the Individual Exchanges where the majority will be eligible for generous tax credits. The coverage available the Exchanges will be just as good as the insurance their employers will be required to offer in 2015.
As former White House health policy adviser Zeke Emanuel pointed out today on MSNBC’s “Morning Joe”: “The delay of implementation of the employer mandate will impact a limited number of companies. I actually don’t think this is that big a deal,” .
Emanuel went on to point out that the “the provision only applies to employers who have 50 or more employees. He estimated that there are ibkt 200,000 total employers in the U.S. [who would be] impacted and that “94 percent already offer health insurance” to employees.
Emanuel’s estimate may be high: “You’ve got 5.7 million firms in the U.S.,” says Wharton’s Mark Duggan, who served as the top health economist at White House’s Council of Economic Advisers from 2009 to 2010. “Only 210,000 have more than 50 employees. So 96 percent of firms aren’t affected.
“Then if you look among those firms with 50 or more employees, something on the order of 95 percent offer health insurance. So it’s basically 10,000 or so employers who have more than 50 employees and don’t offer coverage. Those companies probably employ around one percent of American workers.”
To Judge the Success of Obamacare , Don’t Over-React to Day by Day Headlines
Emanuel also urged taking a long-term view of what the Affordable Care Act is going to accomplish, saying: “We need to look for 2020 rather than moment to moment for changes in the system.”
I couldn’t agree more. Reforming U.S. healthcare is an enormous undertaking. As I have said in the past, it will be a process, not an event. Along the way, there will be glitches. Each time, reform’s opponents will jump up and down, insisting that the End is Nigh. Obamacare is dead. We must ignore them—take the long view, and forge ahead.
I am hopeful that by 2020 reform’s goals will be realized. Even then, we will continue to modify and improve reform legislation over a period of years, just as we have revised Medicare.
The notion that we must “rush” to implement every aspect the ACA is misguided. When attempting to enforce the employer mandate, an emphasis on “speed” could lead to the “train wreck” that Republicans predict.
What is crucial is that the “Patient Proteciton and Affordable Care Act” protects as many Americans as possible, as soon as possible, while making medical care affordable by giving those who must buy their own insurance the subsidies they need. In 2014, this will be happening.
In the meantime, we already have begun to rein in health care costs, slowing healthcare inflation from 7% or 8% a year to roughly 3%. This is only a start, but a very good start.
How Will the Delay Effect the Mid-Term Election?
Predictably, some conservatives are crowing that the delay represents a “huge set back” for Obamacare. “The Obama administration has undermined its sole claim to greatness and delivered a blow to Democrats on the ballot in 2014,” writes Washington Post conservative columnist Jennifer Rubin. /
In truth, this is far from a major setback for reform. Apparently Rubin doesn’t realize how few employers will be affected, and perhaps she doesn’t understand that without the employer mandate, even if these employers don’t offer benfits, the majority of their workers will be eligible for tax credits in the Indivudal Exchanges,
In a piece headlined: “Move to delay ObamaCare employer mandate could upend Republicans’ 2014 strategy ” Fox explains: “ President Obama’s decision to push back key provisions of his signature healthcare law amid growing concerns it isn’t ready for prime time could take a key issue away from Republicans in next year’s midterm elections.
“The announcement Tuesday night that the mandate for many small businesses to provide health insurance to employees will be delayed by one year was hailed by business leaders and seemed to acknowledge Republican claims the plan would hurt – or at least confuse – business. But it also likely undercuts Republican plans to make ObamaCare the centerpiece of their midterm elections strategy.”:
Note that FOX also admits that the employer mandate may not “hurt” businesses but simply “confuse them.” The administration has said that this is one reason for the delay: It hope to streamline the paperwork that will be required.
In 2015, When the Mandate Kicks In, Won’t Small Business Owners Cut Employees’ Hours?
Those who argue that the employer mandate is going to kill jobs say that this is one reason why it should be repealed.. Since the law stipulates that employers must offer benefits to “full-time workers”—and defines full-time as those who work 30 hours a week—the mandate’s critics predict that businesses will begin cutting employees hours back to less than 30 .
As I explained in a recent post, what the critics don’t seem to understand is that the ACA requires that employers offer health benefits if they have “30-time full-time employees or full-time equivalents.” Two workers who put in 15 hours a week equal one full-time equivalent. In other words, the government doesn’t count heads, it counts hours. To figure out how many “full-time employees and full-time equivalents” a business owner has, the government will add up the hours that all of his employees work, and then divide by 30.
The employer who cuts 12 of his 40 full-time employees to part time, and hires another 12 part-time employees to fill in the holes in his work schedule will wind up with 28 full-time workers and twelve “full-time equivalents.”
He won’s have to insure the part-time workers, but he will be required to offer benefits to the 28 who actually work 30 hours a week.
Conceivably, an employee coul slash everyone’s hours to part-time, firing those who are not willing to accept the cut. Then, he wouldn’t have to offer coverage to anyone.
But consider what this would do to productivity and morale—not to mention customer service.
How many of his best workers would begin looking for a new job? How much would it cost him to train the new part-time employees? How many of his remaining full-timers would be enthusiastic about training the Newbie part-timers?
Does this sound like a brilliant business plan to you?
Wal-Mart Vs. Target
Granted some large retail and restaurant chains are threating to reduce employees’ hours. Wal-Mart is leading the way. It has stopped hiring full-time employees, and is relying on part-timers and temps. But as a result, Forbes reports that Wal-Mart is experiencing “complaints about understaffed stores with empty shelves and inventory piling up in warehouses and back rooms.” “It seems even Wal-Mart can’t operate on such a lean staff . . . .Dirty stores, parking lots in disarray and out-of stock products don’t bode well for sales and stores can’t operate that way for long periods.”
Meanwhile, Target, one of WalMart’s chief competitors, continues to offer health care benefits to part-time employees, even though the ACA doesn’t require that it insure them.
Shifting Costs from the Private Sector to the Government
For the Democrats, I see only one downside to the delay. If employers don’t offer benefits next year, and their employees go to the Individual Exchanges to purchase insurance, the government will have to pick up the tab for that many more subsidies. (On the other hand, since many people who work for chains or small companies are young this could mean that more 20-somethings and 30-somethings will join the insurance pool in the Exchanges, lowering the cost of insurance.)
Nevertheless, it is worth remembering that when businesses sponsor health insurance, the average small company pays 65% of the premium while large companies typically lay out 75%. Their contribution is substantial, and at this point, as we strive to move toward universal coverage, the public sector (i.e. taxpayers) need that help.
Conservatives argue that the private sector’s contribution to the cost of healthcare acts is a drag on economic growth and goes a long way toward explaining why the average worker’s wages have stagnated for most of the past 30 years. Businesses spend so much on benfits that they cannot afford raises.
What this analysis ignores is that the workers who have watched their real wages flatten or fall over the past 30 years are not the ones receiving health benefits. Imagine a 5-step income ladder. Today, only 20% of those on the bottom step are offered health insurance at work—down from 38% in 1978. The cost of health benefits does not explain why, over the past three decades their total wage have fallen by 0.7%.
Similarly, since the late Seventies those on the second step from the bottom have seen their wages edge up by a measly 2.2%. Meanwhile only 43% receive health benefits– down from 60% in 1978. Once again, the cost of medical care does not begin to explain why they have received such niggardly raises–especially during a time when productivity has increased.
By contrast, 76% of Americans on the top step of that five-step income ladder now have employer-sponsored insurance. Granted in 1978 nearly 90% enjoyed benefits. But today, their employers are still laying out a substantial sum for medical care while simultaneously handing out raises that have hiked the real income of those at the top by an average of 33%.
Over the past 30 years hard-headed businessmen have raised wages for middle-income workers only when they felt that they must. Most of the time they have felt little or no pressure to lift salaries. Unions had lost their power, and unemployment has been high enough at various points during the past three decades that insecure workers have not demanded better pay. They’re “working scared.”
Moving Away from Employer-Based Health Benefits
At some point in the future we may well want to move away from employer-sponsored health insurance,
But we will have to figure out how to ensure that the private sector contributes to the cost of universal healthcare—perhaps by raising corporate taxes and ear-marking the funds for healthcare subsidies for the middle-income and low-income Americans. .
Conservatives and libertarians ask: Why should employers bear part of the cost of universal health care?
All employers benefit when the nation’s workers are healthy
Moreover it is not fair if some businesses share in the responsibility of supporting “health care for all” while competitors enjoy a “free ride.”
Ezra Klein: The Employer Mandate Should Not Be Delayed; It Should be Repealed.
“Employers would have strong incentives to tilt hiring toward people who have a spouse with a good income (or have health coverage through a family member), teenagers whose parents make a decent living, and people without children (since the eligibility limit for the subsidies in the new health insurance exchanges will increase with family size). Low-income women with children in one-earner families would be particularly disadvantaged” because they would be most likely to go to the Exchange and receive a subsidy, triggering employer penalities.
“This would also happen on the back end,” Klein aruges. .Again he quotes CBPP: “The employer mandate and penalties ‘would likely influence employer decisions about which of their employees to let go when they trim their workforces to cut costs, such as during a recession’ Workers from low-income families would cost the firm significantly more.”
Yesterday Klein repeated the argument, writing that “Eliminating” the employer mandate, “or at least utterly overhauling it is probably the right thing to do.”
I disagree. I admire both Klein’s Wonkblog and the CBPP, and applaud most of what each have written about health care reform.
But in this case the argument is based on the false assumption that employers will choose to pay a penalty of $2,000 to $3,000 per employee rather than provide insurance.
What both Klein and CBPP overlook is what Klein himself has explained in the past:
“People simply misunderstand why employers offer health-care benefits. They’re not doing it as a favor to employees. . . Employers offer health insurance because employees demand it. If you’re an employer who doesn’t offer insurance and your competitors do, you’ll lose out on the most talented workers. An employer who stopped offering health benefits would see his best employees immediately start looking for other jobs.”
Under the Affordable Care Act small businesses will find that insurance is far more affordable because they will be eligible for “large group” rates. Typically these premiums are 18% lower than the rates insurers charge small groups. Many small businesses thatwanted to offer coverage in the past now will be able to do it./
Some employers already have stood up to say that they plan to use Obamacare to strengthen their position in the market where they compete for employees. Recently the Cumberland Farms convenience-store chain announced that it will make an additional 1,500 employees eligible for employer-sponsored health insurance by classifying them as full-timers before ACA kicks in January 1.
“We could have pushed everybody [now working] under 40 hours below 30,” said Ari Haseotes, president and chief operating officer of the company’s Cumberland Farms division. Instead, “we’re making a proactive effort here to go above and beyond, and clearly differentiate ourselves in the job market as a place to come to work.”
Cumberland Farms will have little reason to avoid hiring those single mothers. Very likely they will prove to be extremely loyal, hard-working employees.