Health law mandate hits employers unevenly
Remember those end-of-the world predictions from Nostradamus, the ancient Mayans and Pat Robertson that we somehow survived?
The “employer mandate” may be Obamacare’s version of that.
Starting Jan. 1, one of the most-feared aspects of the Affordable Care Act takes effect after some delay, and requires large businesses to provide health coverage to their employees or face financial penalties.
Despite the concerns surrounding the mandate, it won’t hit all businesses hard, nor will it provide coverage to all uninsured workers. Instead, just like the rest of Obamacare, its impacts will be felt unevenly, among some industries and employees more than others.
Think restaurants, retail and low-wage workers.
Q: My employer doesn’t offer health insurance. Will that change under Obamacare?
A: It all depends.
In 2015, businesses with at least 100 full-time equivalent workers must offer “affordable” health coverage that meets certain criteria. The coverage must be available to full-time employees and their children, but not necessarily spouses, says Larry Levitt a senior vice president at the Kaiser Family Foundation.
Under the law, a full-time employee is someone who works an average of at least 30 hours per week. Don’t worry, the law includes elements that discourage employers from reducing workers’ hours below 30 a week to avoid the mandate.
If large businesses don’t provide health insurance – or if the insurance they offer doesn’t meet the law’s standards – they will face financial penalties. The penalties kick in if at least one of their workers sign up for health plans from a health insurance exchange such as Covered California, AND receive tax credits to reduce the cost of those plans.
How much will the businesses owe? A large business will face a penalty if it doesn’t offer health insurance to at least 70 percent of its full-time employees and their children (rising to 95 percent in 2016 and beyond). If at least one employee receives Covered California tax credits, the business will be fined up to $2,084 for each of its full-time employees in 2015. However, the employer won’t have to pay fines for the first 80 employees in 2015 (dropping to 30 in 2016 and beyond.)
Are you still with me? Brace yourself. There’s more.
If, on the other hand, the businesses offer insurance that doesn’t meet certain standards under the law, which I will explain below, they would face a different penalty: A fine of up to $3,126 for each worker who receives tax credits in 2015.
The penalties increase each year, Levitt says. And in 2016 and beyond, businesses with 50 or more full-time equivalent workers will have to comply.
I know this sounds very complicated and scary. But the impact on businesses and workers likely will be limited.
Even before Obamacare, 96 percent of large businesses already offered health coverage to their employees, says David Chase, California director for the Small Business Majority.
“Generally, businesses are going to find they’re exempt because of their size or because they’re already in compliance,” he says.
Some industries, however, will be affected more than others.
Consider companies with a high share of low-wage workers, defined as firms where at least 35 percent of workers earn $23,000 a year or less. Among those establishments, 74 percent offer health insurance, according to the Kaiser Family Foundation.
“It’s really that segment of the economy, among low-wage workers, where the changes will be the greatest,” Levitt says. “If I’m a restaurant owner or own a small chain of restaurants and don’t offer coverage to my employees now, my world will change a lot after Jan. 1 and it will change for the workers as well.”
Matt Sutton, a vice president at the California Restaurant Association, which represents about 22,000 eating establishments, confirms that some restaurants are scrambling to comply. “It’s the hottest topic in town,” he says.
Up to now, it was fairly common for restaurants to provide health insurance at the managerial level, he says. “This is collecting and embracing a whole other segment of the workforce,” he says.
For business owners who aren’t sure if you have to comply with the mandate, seek help, Chase suggests. “Talk to a broker or whatever advisor you feel comfortable talking to and figure out what your options are,” he says.
For workers who want to know whether your employer’s health plan satisfies the law’s standards, in general the plan has to meet two criteria:
- If you are single, your share of the insurance premium must be no more than 9.56 percent of your wages in 2015. If you have family coverage, that test doesn’t change – it all depends on the cost to the single worker.
- Your employer’s insurance plan must cover, on average, more than 60 percent of your medical expenses, leaving you with expenses of 40 percent or less.
If you’re not sure whether your health insurance passes these tests, talk to your human resources department or ask your boss. Either should know. If they don’t, they better find out.
Click here to find previous Ask Emily columns.