A deeper look at the employer mandate and the work week

The employer mandate was pushed back for 2014 and is being phased in more gradually in 2015-16. What portion of the workforce does this affect?

And what’s going on with that “30-hour” work week? That’s how the Affordable Care Act defines full time, and the GOP has legislation (likely to pass the House in early March – far less likely in the Democratic-led Senate) that would change the definition to the more standard 40-hour week.

As we’ve pointed out before, you hear a lot of talk about how the Affordable Care Act will hurt small business. But if you report those claims, be careful of the definitions. Small businesses with fewer than 50 full time equivalent (FTE) workers are and have always been exempt from the employer mandate. They can, if they wish, get coverage through the new (but still fairly underdeveloped) SHOP exchanges. But whether they choose to and how much they contribute to their workers’ coverage is up to them.

And workers can seek coverage and subsidies on the individual exchanges without triggering a penalty for their employer. According to the Treasury, about 96 percent of businesses fall into this category – although they employ a bit more than a fourth of the workforce. (As I may have said before … I would love to see a story from a reporter going up and down “Main Street” – or a local strip mall – and finding out how many business owners know what a “small business” is under the law and are clear on what they do or do not have to do and when. If you write that story, send it to me.)

Businesses with 50 to 100 workers have to offer coverage, but the start date has been pushed back until 2016. They will have to cover 60 percent – not 100 percent – of the cost and the worker’s contribution has to be “affordable.” This sector represents about 2 percent of U.S. employers – and their workers are about 7 percent of the workforce. It’s going to be an extra expense for those who don’t cover workers now or don’t provide coverage that will meet the new test in affordability or breadth of benefits. (I think we can safely, if too generally, say that those who don’t cover and will have to aren’t happy and those that are covering are probably glad their competitors will have to as well.)

For businesses with more than 100 FTE workers, the mandate starts next year but phases in. In 2015, they have to cover 70 percent, increasing to 95 percent in 2016. They can’t pick and choose and say “Charlie, you I’m going to cover, but Joey, not you because you bug me and I don’t want to pay for your kids asthma. “ It has to be more categorical. But they could, for instance, cover everyone who works 34 or 35 hours to get to the 70 percent and, for the first year, leave out the 30 percent who work fewer hours. About two-thirds of U.S. workers are employed in these bigger businesses.

As a general rule, small businesses are less likely to provide health insurance to workers than large ones. And it’s generally a bigger financial burden on small businesses and the retail/service sector. There are exceptions. A profitable small medical practice, with, say, five doctors, and 25 nurses, lab techs, clerical and other staff, doesn’t have a legal requirement to cover everyone. A not-so profitable service business (restaurant or the like) with 52 workers will be required in 2016. But it may well be a bigger economic burden on the larger enterprise.

So what are the coverage patterns for employers now?

Mercer, the human resources firm, has some numbers. Their categories don’t totally match up to the divisions in the health law – their middle-sized category is 50 to 199, not 50 to 100 – but it’s still useful. The figures below define how many employer offered health coverage to at least some workers in 2013. They don’t shed light on how many are offered, if full- and part-time workers are included, how affordable it is or how many workers take the coverage.

Image courtesy of Mercer LLC

Image courtesy of Mercer LLC

According to Mercer’s survey:

  • Just over half – 54 percent – of small employers (10 to 49 employees) offer health benefit.
  • Four in five – 82 percent – of midsized employers, defined as 50 to 199, offer.
  • Almost all large companies offer (94 percent for those with 200 to 499 employees, 98 percent for those with 500 or more.)

The Kaiser Family Foundation/HRET Survey of Employer-Sponsored Health Benefits, 1999-2013, has similar findings, with more breakdown in the small business world.

In addition, the 30- versus 40-hour workweek debate is likely to rage on for some time. The argument for raising it to 40 is that it is the more standard definition of “full time,” it will reduce the expense for employers (which some argue will dampen job growth) and prevent employers from cutting people working 30 hours to 28 or 29. Here’s a post  from the National Federation of Independent Business on the issue and here’s a statement from the International Franchise Association.

The argument against lowering the work week is that it leaves people uncovered and actually exposes far more workers to having their workweek cut – and that the claims that hours are being slashed for part-timers because of the health law is exaggerated. Here’s a statement  from the Center on Budget and Policy Priorities.

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