White House delays health insurance mandate for medium-sized employers until 2016

For the second time in a year, the Obama administration is giving certain employers extra time before they must offer health insurance to almost all their full-time workers.
Under new rules announced Monday by Treasury Department officials, employers with 50 to 99 workers will be given until 2016 — two years longer than originally envisioned under the Affordable Care Act — before they risk a federal penalty for not complying.

Companies with 100 workers or more are getting a different kind of one-year grace period. Instead of being required in 2015 to offer coverage to 95 percent of full-time workers, these bigger employers can avoid a fine by offering insurance to 70 percent of them next year.

How the administration would define employer requirements has been one of the biggest remaining questions about the way the 2010 health-care law will work in practice — and has sparked considerable lobbying. By providing the dual phase-ins for employers of different sizes, administration officials have sought to lighten the burden on the small share of affected employers that have not offered insurance in the past.

As word of the delays spread Monday, many across the ideological spectrum viewed them as an effort by the White House to defuse another health-care controversy before the fall midterm elections. The new postponements won over part, but not all, of the business community. And they caught consumer advocates, usually reliable White House allies, by surprise, particularly because administration officials had already announced in July that the employer requirements would be postponed from this year until 2015.

Congressional Republicans seized on the announcement as the latest justification for scrapping the health-care law. In particular, they renewed their opposition to the law’s requirement that most Americans have insurance, saying it is unfair to delay rules for businesses and not for individuals.

“If unilateral delays were an Olympic sport, the White House would sweep the gold, silver, and bronze,” House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said in a statement. “The White House is in full panic mode, and rather than putting politics ahead of the public, it is time for fairness for all.”

Originally, the employer mandate — which affects companies employing 72 percent of all Americans — was to have gone into effect Jan. 1, at the same time the law began requiring most Americans to have health insurance.

A senior administration official, who briefed reporters on the proposal on the condition of anonymity shortly before the rule became public, said the Treasury Department decided to allow medium-size businesses more latitude because they “need a little more time to adjust to providing coverage.”

The law says that anyone who works 30 hours or more is a full-time employee, and it compels many employers to offer affordable insurance to those workers and their dependents. It defines affordable as premiums of no more than 9.5 percent of an employee’s income, and employers must pay for the equivalent of 60 percent of the actuarial value of a worker’s coverage. Businesses that fail to do so will eventually face a fine of up to $2,000 for each employee not offered coverage, though workers are not required to sign up for the benefits.

Under the health-care law, small employers — those with fewer than 50 workers — do not have to offer insurance. Instead, they will be allowed to buy health plans through new marketplaces created under the law. Because of hardware and software problems, the federal small-business marketplace, which was supposed to open in October, will not become available until the fall.

But until now, the government had not spelled out important details. Nor had it defined exactly what insurance benefits must be covered by employer-sponsored health plans.
Administration officials said Monday that they will issue a separate set of rules in coming weeks that will cover related questions about how employers must report their workers’ insurance status to the government.

Trade associations — which represent many of the U.S. businesses affected by the new requirements — had a mixed reaction to the rule.

The National Restaurant Association, whose nearly 500,000 members were concerned because many industry employees work odd schedules and do not receive benefits, lauded the phase-in. “It’s welcome news, as is anything that helps employers figure this out and gives them time to comply,” said the group’s director of labor and workforce policy, Michelle Neblett, who noted that many members do not yet have systems in place to keep track of worker hours.

But Joe Trauger, the National Association of Manufacturers’ vice president of human resources policy, said businesses will still face massive new compliance costs under the law. “What they’ve released is doing what they can to make some things that are not great policy more livable,” Trauger said. “But at the end of the day, it’s not great policy.”

Ron Pollack, executive director of the consumer lobby Families USA and an ally of the administration, said he was “very surprised” by the new postponements. He contended that, because most large employers already offer insurance, the law’s requirements are not that burdensome. But Pollack added that for workers at large companies that do not provide coverage, “it’s very unfortunate . . . that they don’t have a guarantee it will be extended to them for quite some time.”

Senior administration officials said the latest postponement will have little real-world impact, because the vast majority of employers have fewer than 50 workers.
But employees of bigger companies represent a much larger fraction of the U.S. workforce, with nearly seven in 10 at companies and other organizations that employ 100 or more people.

The extra time before certain employers must offer insurance is among a variety of specifics that Treasury Department officials spelled out for the first time in the final rule they issued late Monday afternoon. Each addressed an issue that, while narrow, had become controversial among certain constituencies.

For instance, the rule pleased fire companies, which had feared that the government might have required them to offer insurance to volunteer firefighters and other first responders. The rule also said that educators who have summers off are nonetheless to be treated as full-time workers entitled to be offered coverage. Adjunct faculty members will be counted as working 2.25 hours for ever hour in the classroom. And the rule said that seasonal workers — such as farm workers or extra department-store hires around Christmastime — are considered full time only if they work for at least half the year.

Sandhya Somashekhar and Ed O’Keefe contributed to this report.