Thursday, February 20, 2014

Obama administration delays employer mandate, yet again.

     Are small employers celebrating the latest delay in employer mandate? Should they? In this article the authors report a lukewarm response to the latest delay in the ACA’S employer insurance requirement. The government announced on February 10, 2014 that the requirement for small businesses be delayed, until 2016. The small businesses here, by definition, are the ones that employ anywhere between 50 to 99 employees. The authors point out that some small employers have already taken cognizant steps to comply with the requirements of the new employer mandate of the ACA. They have either: provided health insurance to their employees or cut down on the number of employees to avoid paying for penalties. Therefore, the delay doesn’t mean much to them as they have already planned for the ultimate inactment of the mandate.

     As the insurance premiums became more expensive over the years, some employers are now forced to consider the option of paying a penalty (2000 dollars per employee) rather than buying insurance; thus saving money. This is where the fallacy of the act lies; it does not guarantee coverage to the employees. Although such a practice may hurt employers in long run because the penalties may be higher in coming years, as of now it makes fiscal sense. The Obama administration states that the recent delay will provide ample time to the small employers to decide what plans they want to offer to employees (high deductible or high premium). The employers feel a need to educate themselves, and discuss the options with the employees to come to a decision. True. But many feel that the delay doesn’t mean much. The focus on small employers is not undeserved; according to the statistics small businesses make up 99.7 percent of U.S. employer firms. Even though the ACA is helping the small employers in many ways, the adverse effects of the affordable care act are very real for some businesses. For instance, UPS cut down on insurance coverage to spouses of the employees.

      Whether the latest delay is to give employers ample time to prepare for the future, or merely for postponement of such adverse effects till next big elections; is unclear. Digging deep into the policies and regulations, it is evident that the ACA has many provisions for small businesses. For instance, small businesses with 25 Full time equivalent employees (FTE’s) or fewer, with average wages below $50,000/year, can get tax credits to help save for employee premiums. Not only that, but businesses with over 50 FTEs are exempt from the fee on first 30 FTEs - decreasing the negative effect the law could have on businesses who narrowly qualify as a large firm. The rising discontents of the conservative political class can be mitigated, by the fact that - the law, as it is, will upset less than 0.2 % of small businesses (96% of all businesses or 5.8 million out of 6 million total firms have under 50 employees). It is out in the open: from humble startups to the largest corporations, employers have countless new rules and regulations to keep track of. And in some cases, there are new costs too. How this will play out in the biggest capitalistic economy of the world remains to be seen.


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