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California Businesses Welcome ACA Delay

California business groups applauded the Obama administration’s decision to delay for one year a provision in the Affordable Care Act that requires businesses with 50 or more employees to provide health insurance for full-time workers.

Delaying the mandate until January 2015 will give businesses more time to deal with new data gathering and reporting requirements, according to analysts.  

“For the larger business community, particularly in the Bay Area, this isn’t going to have a huge impact because the majority of them already offer health insurance to their employees,” said Micah Weinberg, a senior policy adviser for the Bay Area Council, a business group based in San Francisco. “But still, I think companies are breathing a sigh of relief. Understanding the reporting requirements was extremely difficult.”

The delay shows the Obama administration is listening to the voice of business, analysts said.

“We’re happy the government is listening,” said Rhett Buttle, vice president for external affairs at Small Business Majority, a business association that supports health reform. “This will allow some companies who are offering insurance for the first time a little more time to look at their options.”

The California Chamber of Commerce echoed concerns about reporting requirements called for under the law.

“Although more than 90% of CalChamber member companies provide health benefits to their employees, many of them have expressed frustration and confusion about what the act means to them and how it would be implemented,” said Allan Zaremberg, president and CEO of the chamber. “The recent delay in the employer mandate of the ACA is recognition of how complex these issues are for employers.”

Mandate Could Create ‘Perverse Incentives’

Some business groups said the policy creates the possibility that companies would alter weekly hours their employees worked. To be considered full time under the law, employees must work at least 30 hours. The ACA in 2015 will require companies to report to the Internal Revenue Service data on employer-issued health insurance, including proof that employers are providing full-time workers with minimum essential health coverage.

Weinberg said the employer mandate could create “perverse incentives” for employers.

“The requirement is very poorly designed, particularly because it relates to just full-time employees,” he said. “It was creating a lot of strategizing and decision-making by employers to keep people under 30 hours a week.”

“A more intelligently designed fee would probably focus on total number of hours rather than whether or not employees are full time,” he added.

‘Health Reform Rests on Shared Responsibility’

Beth Capell, a policy advocate for Health Access California, discounted ACA critics who claim the delay shows flaws in the law and pointed out that data reporting by companies simply requires a new information technology infrastructure.

“The people who are saying it’s rushed are the same people who’ve always opposed providing comprehensive affordable health benefits to their employees,” Capell said.

She did say, however, that information technology must be in place for companies to report employee insurance data.

“Currently there is no state or federal agency that collects information on how many hours employees work, and what health benefits they receive,” she said. “So part of the question here is how to do that in a way that allows enforcement of the employer requirement.”

The delay is expected to have little impact on the financing of health care reform. A report this month from the Urban Institute calculates the government next year will lose $3.7 billion in revenue that it would have received in penalties levied against employers.

However, people who are studying this issue say if the employer mandate were killed, it would weaken the ACA.

“Only delaying the mandate for one year doesn’t seem to be a very big deal — it’s only projected to raise something like $4 billion,” Weinberg said. “On the other hand, if it gets delayed indefinitely, then that will blow a pretty big hole in the budget.”

Capell agreed.

“The one-year delay is not a problem in implementing the rest of the ACA, but it would be a larger problem if the business community was successful in eliminating the responsibility of employers to provide benefits for their employees,” she said. “Health reform rests on shared responsibility, and employers are an important piece of this.”

Most Large Employers Already Offer Coverage

Mark Mazur, assistant secretary for tax policy at the U.S. Department of the Treasury, said the Obama administration’s decision to postpone the employer mandate was a direct response to business community concerns.

“We have heard concerns about the requirements and the need for more time to implement them directly,” Mazur wrote in a note on U.S. Department of the Treasury’s website. “We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so.”

Data collected by the Kaiser Family Foundation showed that in 2012, 60% of employers offered health insurance. The larger the company, the more likely it offered health insurance, according to Kaiser researchers. “Virtually all employers with 1,000 or more employees offer coverage to at least some of their employees,” the foundation found.

The Urban Institute report underscored the Bay Area Council’s argument that the one-year delay on the employer responsibility requirement will have little impact on the rollout or financing of the ACA. 

“The employer responsibility requirement is not central to expanding insurance coverage and does not have substantial effects on the public and private costs associated with the coverage expansion,” the report stated. “Under the ACA, the employer penalty is not what keeps employers offering coverage. It is the preferences of their workers, the same reason employers are very likely to offer coverage even before implementation of health care reform.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

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