Postponement of Employer Mandate: Great for Employers, Hard on Providers

Last week’s announcement by the U.S. Department of Treasury that the employer health insurance mandate will be postponed–again–means healthcare providers will have to wait another year before get paid.

Under the Patient Protection and Affordable Care Act, employers with more than 50 employees are required to offer health insurance as of Jan. 1, 2014. Last year the Obama administration postponed that deadline to Jan. 1, 2015. On Monday the Treasury announced that it would further postpone implementation, allowing many employers one more year to fully implement the mandate.

Specifically the Treasury announced that companies with 100 or more employees will no longer be required to cover 95 percent of their full-time staff (30 hours per week or more) in 2015. Instead they would have until 2016, but in 2015 they must provide a health insurance benefit to 70 percent of their FTEs or face a penalty. Companies with between 50 and 99 employees now have until Jan. 1, 2016 to provide health insurance or face employees, pushed back from Jan. 1, 2015. Employers with fewer than 50 employees do not have to provide a health insurance benefit under the ACA and that remains unchanged.

Nearly two-thirds of the labor force in the United States work for firms with 100 or more employees, and another 15 percent works for firms with 50-99 employees. In all some 80 million employees and their families will be affected, directly or indirectly, by the postponement of the implementation regulations.

This second postponement of the implementation of the employer health insurance mandate is bad news for healthcare providers and for insurers. For providers, the potential challenges will be numerous:

Patient confusion. Those employees who fall into the gap caused by this postponement of enforcement will be required to purchase insurance by way of the exchanges. While most large employers offer a health insurance benefit to employees, millions who work for service industries such as fast food and retail do not have access to federally approved plans with mandated limits on out-of-pocket costs. As these also tend to be individuals who are paid relatively low wages, they are also the most complicated to cover as they might qualify for Medicaid or other subsidized programs.

Higher-than-expected emergency department (ED) expense. A large number of healthy young people will be exactly the demographic to be most affected by this delay. Rather than having an employer manage the insurance mandate, many young people will choose to not get any insurance at all and instead pay the penalty. This means the emergency room will continue to be forced to provide healthcare services to this population, at a cost to healthcare providers.

insidePatientFinance.com subscribers can download a fact sheet of the Treasury Department’s decision here:  (You must be logged in to download this file. Don't have an account? Register for free and you'll be returned to this page.)