10 Jul FAQ: What Workers And Employers Need To Know About The Postponed Employer Mandate

Surprising both friends and foes of the health law, the Obama administration on Tuesday announced the delay of a key provision: the requirement that all but the smallest employers offer medical coverage or pay a fine.

Companies with at least 50 workers now have until 2015 to provide coverage if they don’t offer it already, giving them and Washington an extra year to work through the complex details of the legislation. The administration will deliver more guidance next week.

Meanwhile other parts of the law remain on track for implementation next year, according to officials. Here’s what the change means — and doesn’t mean — for workers and employers.

Q. The government has delayed the requirement for large employers to offer health plans. Am I still obligated to obtain coverage next year?

Yes. The requirement that individuals obtain health insurance or pay a penalty — which starts at $95 next year, or 1 percent of household income, whichever is higher, and rises to $695 or 2.5 percent of household income in 2016 — has not changed. But for workers whose employers delay plans to offer coverage, buying a health plan in the subsidized marketplaces known as exchanges might actually be a better deal than what they would have been offered.

Q. My employer already has a health plan. Does this increase chances the company will drop coverage next year?

A. Probably not. The large majority of employers provide insurance even without a government requirement — to recruit and retain good, healthy workers, analysts say. The administration’s decision doesn’t change that.

“For people whose employers already offer coverage, they’re doing it for a reason, and that reason still exists,” said Paul Ginsburg, president of the Center for Studying Health System Change.

Q: If my employer already offers insurance, will this decision mean my coverage will be less generous in 2014?

That’s unlikely. The law requires all employer-sponsored insurance to cover at least 60 percent of medical costs. Coverage that costs more than 9.5 percent of household income is deemed to be unaffordable and those workers may qualify for premium subsidies on the online health marketplaces – putting the employer at risk of incurring a federal penalty. In addition, employers that buy policies rather than self-insure must provide a minimum set of benefits.

Sandy Ageloff, a benefits consultant with Towers Watson, says the administration’s announcement appears to lift the threat of financial penalties for companies that don’t meet these thresholds in 2014, though “those finer points will come out in next week’s guidance” from the administration.  It may be an academic point for most companies already offering insurance, because as Paul Fronstin of the Employee Benefit Research Institute notes, most existing employer policies already meet the law’s 2014 requirements.

Q. What kinds of companies are likely to delay offering insurance to employees?

A. Large employers with lower-wage or variable-hour workers such as retailers, farms, food processors, restaurant chains, casinos and hotels are most likely to delay offering or upgrading coverage, analysts say.

But even well-paying companies such as Wall Street banks might employ uninsured call-center workers whose coverage could be delayed, said Steve Wojcik, vice president of public policy at the National Business Group on Health, an employer group.

“This could be far-reaching into all kinds of companies that you might not think of,” he said.

Q. What does the delay of the employer mandate mean for lower-wage workers?

A. Many low-wage workers already are employed by firms that don’t offer coverage, and, absent a mandate, that may not change next year, says Sabrina Corlette of the Center on Health Insurance Reforms at Georgetown University. Workers who don’t get coverage through their jobs can enroll in an insurance plan through online marketplaces, or exchanges, set to open Oct. 1.

Uninsured people earning less than 400 percent of the federal poverty level, about $45,960 for an individual or $94,200 for a family of four, would be eligible for a sliding scale federal subsidy to help offset the premium cost.

The lowest wage workers – those earning up to about 200 percent of the poverty level –  may actually be better off if their employer does not offer coverage and they go onto the exchange. That’s because the subsidies in that income range are larger, and coverage may actually be more affordable than that offered by an employer, particularly for family policies. Some of those workers may also qualify for Medicaid, particularly in the 23 states and the District of Columbia, which have expanded eligibility for the federal-state program. “This is going to be a boon” for some people, said Ginsburg.

Q. Will Tuesday’s announcement mean that more Americans will be eligible for subsidies to purchase coverage?

The Obama administration said its decisions won’t affect employees’ access to the premium tax credits. In fact, the delay in the employer mandate may result in more low-to-moderate income Americans seeking coverage – many of them eligible for federal assistance. So that could push up the amount the government is expected to pay out in premium and cost-sharing subsidies, which before Tuesday’s announcement wasestimated at about $23 billion next year.

Tracking who is eligible for such tax credits or subsidies may be more complex.  The subsidies are available only to people who meet the income requirements and don’t have job-based coverage that meets minimum affordability and adequacy requirements. With the one-year delay for employers to report such coverage, “it would be impossible for Treasury to determine whether someone had access to affordable health insurance,” said Joseph Antos at the American Enterprise Institute. Proposed rules, expected to be finalized soon, allow people applying for subsidies through the new market to simply attest that they don’t have access to job-based coverage, said Timothy Jost, a law professor at Washington and Lee University, in an analysis on the website of policy journal Health Affairs.

The Obama administration also hopes that employers will voluntarily provide the information, starting next year, according to a post by Mark J. Mazur, assistant secretary for tax policy at Treasury.

KHN reporters Julie Appleby, Mary Agnes Carey, Jay Hancock and Jordan Rau contributed.