The Obama Administration, through the Department of Treasury, announced that it will not enforce the Affordable Care Act employer mandate for companies with 50-99 employees until 2016. In addition, the new guidance says companies with 100+ employees can meet their obligations under the ACA in 2015 by offering insurance to 70% of their employees. Beginning in 2016, all companies with 50+ employees will be required to offer insurance to 95% of their employees, as originally mandated by the law. This is the second delay in the enforcement of the employer mandate in the past 8 months.
Given the amount of time employers have had (and still have) to comply with the law, Treasury’s “transition relief” justification for the delay seems a bit far-fetched. It seems that this announcement is a response to political pressure from business owners and leaders, particularly with the mid-term elections coming up and big rate increases forecasted for small businesses in the fall.
This news comes two weeks after three Republican senators issued their plan, Patient CARE, which permanently eliminates the employer mandate.
So, with the Republicans seemingly opposed to the employer mandate and the Democrats afraid of it, the prospects of its implementation have meaningfully declined. It would not be a surprise if the employer mandate ultimately did not materialize.
How does this help employers?
The ACA’s original employer mandate would impose a $2,000 after-tax penalty per employee per year on companies with 50+ employees which do not offer insurance. Even if the original employer mandate were enforced as planned, many employers and their employees would benefit from transitioning the workforce from traditional group insurance to the individual market for coverage. Why? Market competition and government subsidies make individual insurance plans purchased on exchanges significantly less expensive than group plans.
The near-term (and possibly long-term) elimination of the employer mandate tax means that the already substantial cost advantage of moving to the individual market increases by $2,000 after tax. For companies which would already have benefitted from transitioning to the individual market, the savings are that much greater. And for many other companies, dropping might become the right decision.
With two delays already and little apparent political support for its enforcement on the horizon, the prospects of the employer mandate taking effect in 2016 or later are from certain. Employers and their employees are likely to be well served by savings in the individual market, as long as employers thoughtfully plan and manage the transition.
Benefitter helps your company successfully make a transition to the individual market for health coverage and reduce your company’s health expenses by up to half, while giving your employees a comparable deal and more choices. If the individual market opportunity sounds interesting to you, check out the Benefitter story at www.benefitter.com