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Not Worth Writing Home About

Chairman's Column - August 2013

Patrick L. Larmon, NAW 2013 Chairman of the Board

On July 2, the Treasury Department surprised the world in a blog post with the news that implementation of the “employer mandate” enacted in the “Affordable Care Act” (ACA), scheduled to go into effect on January 1, 2014, is being delayed for one year. A week later, the Obama Administration’s action became official when Treasury and the IRS issued an official guidance document to that effect. What this means is that reporting requirements aimed at employers and others will not be mandatory until 2015, and that “employer shared responsibility payments” (penalties) won’t apply until 2015.

Make no mistake: This is a good thing—good enough to lead the Republican-controlled House of Representatives to vote on a bipartisan basis one week later to pass a bill (H.R. 2667) to codify this delay. It’s such a rarity these days that Washington, DC does something good for business that when it does—once the shock has worn off—we should all be moved to shout “THANK YOU!”

But before anyone gets overly excited about this, let’s put it into context:

  1. Despite the fact that the ACA was enacted three years ago, final rules applying the employer mandate and the reporting requirements aren’t in place yet and January 1, 2014 is just five months away. In other words, this one-year delay acknowledges a simple reality: No one is ready for this. In a sense, this is a testament to the complexity of the health care law and the difficulties that everyone, the government included, is having in coming to grips with all of this.
  2. Small employers—those of you with fewer than 50 full-time equivalent employees (about 96% of all U.S. businesses): This delay does nothing for you because the employer mandate never applied to you in the first place. The mandate/penalty applies only to “large” employers (those with 50 or more full-time equivalent employees), and only about one quarter of 1% of businesses in this size range do not provide health insurance to their employees today. While it is true that some large employers’ health plans may not fully satisfy ACA standards and have thus bought some time with this delay, those whose plans are compliant gain nothing from this, making it clear that the biggest beneficiary of the delay is a relatively small number of the nation’s employers.
What really needs to happen is for the employer mandate to go away completely. It incentivizes employers to reduce workers’ hours and turn full-time jobs into part-time jobs; it encourages some employers to actually cut jobs, and others not to expand their businesses and create jobs—in order to avoid the grip of the employer mandate. Ironically, some employers in its grip may actually find that reducing or even discontinuing health benefits and paying any resulting penalty, is the most cost-effective way to go.

NAW-supported legislation called the “American Job Protection Act” to repeal the employer mandate has been introduced in both the House (H.R. 903) and the Senate (S. 399). Contact your federal legislators—ask them to get on board by cosponsoring the employer mandate repeal bill pending in their chamber. Because in the grand scheme of things, the one-year delay, while welcome, really isn’t worth writing home about.