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Lemonade from a Lemon: Delaying the Large Employer Mandate for Coverage

Lemonade from a Lemon: Delaying the Large Employer Mandate for Coverage

by Ryan Biehle, Health Policy Associate

In a surprising announcement last week the Treasury Department decided to postpone the employer mandate, as it is called, in the Affordable Care Act (ACA) until 2015. One of the key provisions of the law, the mandate requires employers with over 50 employees to either offer health coverage to their workers or pay a per-employee penalty. It seems nobody saw the decision coming and speculations on the consequences ran rampant. Thankfully, the shock has worn off and implementation of the ACA is moving forward with few impacts.

First, most large businesses with more than 50 employees already provide health insurance. In Colorado, there are 27,400 such firms and a whopping 97.7% of these offer insurance. That means only 630 large employers in Colorado do not yet offer insurance. Sure, that’s more than we would like, but it means a relatively minor impact from delaying the employer mandate for one year. According to the Congressional Budget Office (CBO), less than 500,000 people nationally were expected to gain employer-sponsored insurance in 2014, and many of these will be eligible for premium subsidies to purchase affordable insurance in the marketplace due to the delay. That includes employees’ dependents that might not otherwise get coverage through certain employer-sponsored plans.

This problem is known as the family affordability glitch. An individual and their family can qualify for premium assistance in the marketplace if they are not offered an affordable option by their employer. An affordable employer option must be less than 9.5% of their income. However, the glitch is that the definition of affordability is only based on the premiums of the individual employee, not on the premiums for the entire family. This means that the individual premiums could be under the 9.5% of their income but the family premiums could be far more expensive. This creates the unfortunate scenario where families that should be able to qualify for premium assistance will instead have to pay more than 9.5% of their income. Delaying the employer mandate may enable these families to qualify for subsidies and purchase coverage in the marketplace.

Second, Colorado consumers and small businesses with less than 50 employees can still purchase insurance in the new marketplace, known as Connect for Health Colorado, beginning October 1st, 2013. Connect for Health is on track to open as planned, and consumers with incomes up to 400 percent of the federal poverty level ($94,200 for a family of four) will be eligible for subsidies to help cover the cost of their insurance premiums.

Consumers should be able to count on insurance that covers them when they get sick. According to the Robert Wood Johnson Foundation nearly 60 percent of Americans get their insurance through an employer. It’s crucial that this coverage continue when so many Americans rely on it. The evidence suggests most employers plan to continue to offer health insurance. After all, these benefits are a great recruitment and retention tool, and a healthy workforce means higher productivity with fewer sick days.

Finally, the mandate helps pay for better and expanded coverage in Colorado and across the country, so it should not be delayed beyond 2015. The CBO estimates that penalty payments will yield $10 billion in revenue the first year the mandate is implemented and a total of $140 billion over ten years. In part, these penalties will help pay for expanding Medicaid and offering premium subsidies to eligible families purchasing insurance in the marketplaces.

In order to get every American insured, it will take shared responsibility between employers offering coverage, individuals purchasing insurance in the new marketplaces, and expanded public insurance programs like Medicaid. As implementation moves forward, advocates, policymakers and consumers should remain optimistic that the ACA promises to expand access to coverage to millions of uninsured Americans.

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