Employer Mandate is Here – Ready or Not

 

The Employer Mandate of ObamaCare is finally upon us. The original law called for implementation of the mandate on January 1, 2014. President Obama unlawfully delayed the impact until after the November 2014 mid-term elections for political reasons – to avoid the backlash of thousands of employees losing their insurance coverage or their jobs.

But now the delay is over, at least for large businesses. On January 1, 2015, all businesses with more than 100 employees must provide healthcare insurance compliant with ObamaCare for at least 70% of their full-time employees – and at least 95% in 2016. Those companies with 50 to 99 full-time workers must comply with the law on January 1, 2016. (The law passed by Congress called for 100% coverage of all full-time employees in any company with over 50 such workers.)

The Employer Mandate Impact

Long before this month, employers and workers began feeling the impact of the Employer Mandate. Businesses have been reducing workers’ hours to keep below the 30-hour workweek that ObamaCare defines as full-time.

This was dramatically demonstrated in July 2014 when the Obama administration bragged about the creation of 288,000 new jobs. But the reality was that full-time jobs plunged by 523,000 and part-time jobs increased by about 800,000. The new jobs “created” were actually mostly part-time. In fact, the Bureau of Labor Statistics (BLS) reported that only 47.7% of adults in the U.S. at that time were working full-time.

To address this problem, the new Republican Congress passed a bill in the House this month that would re-define the workweek as 40 hours for full-time. This would allow employers to increase workers’ hours from 29 to 39 without the “tax on full-time employment,” as economist John Goodman refers to the Employer Mandate, punishing the employer.

The White House has pushed back against this legislation claiming this will lead to fewer workers having health insurance and those working greater than 40 hours working less. Both concerns are unfounded.

The CKE Restaurants Experience

Andy Puzder, CEO of CKE Restaurants, writes of his company’s experience in a recent Wall Street Journal article. He says that his company has approximately 20,000 employees, 6,900 of whom work 30 hours or more per week and are therefore eligible for ObamaCare-compliant insurance. Of these, 1,447 already had such insurance. The remaining 5,453 were eligible to sign up. But only 420 actually enrolled. That’s a mere 2% of total employees or 6% of eligible employees.

Why so few signing up? The penalty for failing to have insurance as an individual is $325 or 2% of annual household income up to maximum of $975 (income = $48,750). Since the average income of these workers is $26,250, most would pay only the $325 tax. The cost of their portion of the health insurance would be $1,104. To secure them alternative health insurance, the company also offers inexpensive, non-compliant healthcare coverage. They still pay less with these plans even with the ObamaCare tax on non-compliance (which is unlikely to be ever collected).

Puzder also says concerns that companies would shift 40-hour employees to 39-hours or less are unfounded. First, the BLS defines “full-time” as “persons who work 35 hours or more per week”. Therefore, contrary to the White House claims, many full-time employees work less than 40 hours per week.

Second, he says 78% of his workers who enrolled in ObamaCare-compliant plans already had such coverage. It is necessary to provide insurance to compete with other companies for good workers. This will not change if the workweek is redefined by Congress as 40 hours. Of the 20,000 workers at CKE Restaurants, only 1% work more than 40 hours and they represent many of their most important employees. Their hours will not be cut just because of new definitions of “full-time”.

At CKE Restaurants, the ObamaCare definition of “full-time” has impacted 2% of their employees. Yet the impact of the law has been substantial as Puzder writes:

“For results like that, ObamaCare has caused millions of full-time jobs to become part-time, imposed a tax on lower-income workers who cannot afford it, forced millions of people out of insurance they like, restricted access to doctors for millions of others, and created an enormous bureaucracy that discourages our doctors and nurses while suppressing health-care system innovation.”

 

This is just the experience of one, albeit large, employer. But there will be many other employers impacted in the years 2015 and 2016. Since about 160 million Americans get their healthcare insurance through their employer, the affect on Americans will be huge. I will continue to chronicle this impact in future posts.

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