For employers, following the Obamacare bouncing ball is frustrating and costly. After 11 delays and executive orders, the question remains: Is this just a moving target or a wrecking ball for employers? The Obamacare changes require employers to experience a daily dose of research to make sure they are in compliance, prepare for complex health care mandates or be subject to penalties and fees.
Many employers have solicited costly legal and financial experts to assure not only up-to-date information but strategies to plan for staffing and issues with profit margins and consumer pricing.Combing the Internet does not yield easy results. We've created an Obamacarephobia of sorts, not only fear of the effects of the law but fear of ignorance of the law and its ramifications. According to the recent U.S. Chamber of Commerce quarterly survey, Obamacare is the top concern for businesses:
- "Only 30% say they are prepared for the requirements of the law, including participation in the marketplaces, and one-quarter say they are unaware of what is required."
- "Among small businesses that will be impacted by the employer mandate, one-half of small businesses say that they will either cut hours to reduce full time employees OR replace full time employees with part-timers to avoid the mandate. 24% say they will reduce hiring to stay under 50 employees."
- "77% continue to think the U.S. economy is on the wrong track. However, small businesses are more optimistic about their local economy and individual business."
- "The majority (61%) of small businesses do not have plans to hire next year."
We can't ignore the fact that survey predictions are coming true, with a stunning increase in part-time jobs. Here's proof positive: Based on August 2013 statistics, the Department of Labor Household Survey revealed that 77 percent of new jobs created were part-time, and the trend continues, consistent with U.S. Chamber of Commerce survey data. Twenty-three percent of new jobs were full-time. That's a bleak labor market.
It has been estimated that 80 percent of small business health insurance plans will likely be cancelled because they are out of compliance with the 10 requirements of Obamacare. Employers are gearing up for their benefit changes and are regularly considering reducing working hours to below the 30-hour threshold and dropping employee dependent coverage.
Reinsurance Fees for Preexisting Conditions
To defray the costs of preexisting conditions, the new $63 reinsurance fee is now in effect for three years (planned to be reduced each year). This applies to insured employees and their insured dependents. Technically, the fee will flow downhill from insurance providers to employers and on to employees and covered dependents.
Equal Coverage Mandate
A little-reported provision of Obamacare, the equal coverage mandate, is the latest provision to raise its notoriety by White House executive postponement. Employers will be prohibited from offering better health plans and costs to higher-paid employees with respect to eligibility or benefits. The Internal Revenue Service has not created regulations for this facet of the law and its provisions for huge fines for employer noncompliance.
Literally interpreted, a highly paid professional athlete could be provided the same health coverage as the accountant despite the physical nature of the job.
The IRS is unsure how to measure the value of health benefits and definitions of discrimination for fines. And the expected fines are projected to be steep, upwards of $100 daily for each employee violation. Frankly, noncompliance could put small businesses out of business.
But wait: There could be an unintended consequence to the equal coverage mandate -- this time a negative for lower-paid employees. Many employers set their premiums based upon pay scale. Technically, higher-paid employees pay more than those in lower pay ranges. How literal the rules will be followed remains to be seen.
Full Employer Mandate Goal Post Change to 2015
When the employer mandate was moved in July of last year to January 2015, many if not most employers had started the ball rolling with their organizational structure issues. Many employers plan to pay penalties instead of complying with the 10 essential benefits, ranging from emergency services to the controversial maternity coverage for all.
In 2015, failure to comply with the essential benefits will result in a non-tax-deductible employer "Shared Responsibility Payment" to the IRS (also referred to as the "Play or Pay Tax"). The IRS calculations are complicated and demand critical and individual analysis, but generally, if the company has 50 or more employees working 30 hours or more per week, the payment will be $2,000 per employee (though the first 30 employees are exempt) if the company does not provide insurance, or $3,000 per employee if insurance is offered but not compliant with the mandate. Be mindful that the hours worked will need to be evaluated on a monthly basis to determine eligibility. Yes, the fee is waived for the first 30 employees. Again, many employers plan to pay the tax in lieu of self-insuring or purchasing health insurance compliant with Obamacare.
With legal challenges underway, any one of the pending lawsuits could change the direction of compliance. With full-court press ranging from congressional exemptions to religious affiliation challenges to 21-state contests to executive orders, watch the judicial branch for the future of Obamacare.