On July 2, 2013, a one-year delay was announced in the penalties and reporting requirements for large businesses (50 or more employees) for providing health insurance coverage under the Affordable Care Act. Concerns and criticisms of this decision beg the question – what is the impact of delaying the health insurance shared responsibility for large businesses? The simple answer in our opinion: Not much.
The Affordable Care Act creates a shared responsibility among individuals, employers, and government to offer health insurance coverage. The goals are to reduce the number of Americans without health insurance and to enhance access to health insurance.
To accomplish these goals, the law sets up a system of shared responsibility for employers. It breaks them into tiers, with these stipulations:
- Employers with 50 or fewer employees (FTEs) – No requirement to offer health insurance.
- Employers with more than 50 employees (FTEs) – Required to offer health insurance.
- Employers with more than 200 employees (FTEs) – Required to automatically enroll employees into health plans offered by the employer, with an employee opt-out provision.
During the law’s debate, many commentators, including us, believed the employer mandate for employers with more than 50 employees was an ineffective policy provision. We thought employers at the margins would begin to make employees part-time or shed jobs, all with the goal to avoid the mandate. Prior to the Obama administration announcement on July 2, this was starting to happen, particularly in low-wage service businesses and some public-sector employment.
In addition, the employer requirements apply to very few businesses. No business with fewer than 50 employees is required to offer or provide health insurance to employees. Federal data indicate that represents 96 to 98 percent of all businesses in the nation. And it includes the vast number of businesses in rural areas. The House of Representatives’ Small Business Committee estimates that, when considering this exemption and the number of businesses already providing health insurance to employees, the employer mandate will apply to less than two percent of businesses.
The bottom line is that roughly 10,000 out of 5.7 million businesses in the nation (0.01 percent) would be subject to a penalty that is now being delayed. And as to the Affordable Care Act goal of increased health insurance coverage, the Urban Institute estimates the delay will decrease non-elderly health insurance coverage by 0.1 percent.
So, in our view, this was a major Affordable Care Act announcement without much practical consequence for the long-term goals of the law.
You’ll find more information to help you understand the ACA here.
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