Health Care

Employers Get a Reprieve From Obamacare's Rube Goldberg Mandate


President Obama makes a statement regarding the Affordable Care Act on June 28, 2012

Photograph by Luke Sharrett/Pool via Bloomberg

President Obama makes a statement regarding the Affordable Care Act on June 28, 2012

Obamacare’s so-called employer mandate was always one of the more convoluted pieces of a convoluted law. It was designed to make companies that don’t provide health coverage pay a fine if their workers wind up getting taxpayer-subsidized health plans. The dizzying regulations behind the mandate, which applies to companies with at least 50 employees working at least 30 hours, prompted warnings from some corners that businesses would cut staff and hours to avoid complying.

The White House’s holiday week announcement that it would delay the mandate for a year is a partial victory for business groups and opponents of the law. In practice, the consequences will be minor for most employers: 96 percent have fewer than 50 employees and aren’t subject to the mandate. The vast majority of larger employers already provide coverage.

But for the ones that are affected, the mandate is a big deal. These tend to be low-wage employers such as restaurants, retail stores, and home-health companies. Adding health care or paying penalties of $2,000 per employee who get subsidies can significantly increase labor costs if you’re paying salaries of $20,000.

On top of that, businesses of all sizes complained about the complex calculations needed to determine whether they would face penalties. For companies with large part-time or seasonal workforces, doing this math is a particular headache. (It’s also a boon for benefits consultants and payroll companies that promised to sort through the mess.) This is what the White House is promising to simplify: “We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination,” Obama adviser Valerie Jarrett wrote in a blog post.

The delay gives the administration another year to try to dispel the morass of confusion surrounding the law, which prompted even allies to worry about a “train wreck” of implementation. Politically, it both gives fodder to opponents who say Obamacare is unworkable and takes some heat off the law’s defenders by pushing an unpopular provision off into the distance.

It’s worth a reminder how we got here. None other than Richard Nixon first proposed (pdf) an employer mandate to provide health insurance in 1974, and Mitt Romney gave it a test drive in Massachusetts three decades later. It’s a relatively straightforward idea that becomes a tangled mess when translated into policy.

Obamacare itself is a Rube Goldberg-worthy arrangement of carrots and sticks designed to achieve near-universal coverage because simpler ways to reach the same goal (such as expanding Medicare for all) are politically unfeasible. The rules designed to cajole companies into providing coverage are tangled indeed, and employers will welcome the reprieve.

John_tozzi
Tozzi is a reporter for Bloomberg Businessweek in New York.

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