Why Do American Companies Need Another Year To Insure Employees?

On Monday, the Obama administration announced various amendments to the Affordable Care Act that include extra time and more leeway for employers supplying health insurance for their workers.

It’s widely seen as an attempt to soften attitudes toward American health care policy before fall midterm elections, but for many business owners it’s almost necessary, given the complicated nature of the rules.

The original mandate, which applies to companies that employ 72 percent of all Americans, was supposed to take effect in January. But industry lobbyists have long been asking for more time to implement the rules.

As per the announcement yesterday, businesses with 50 to 99 workers now have until 2016 before they’ll have to pay penalties for uninsured workers. The rules also changed for companies with more than 100 workers. Before, they needed to make sure 95 percent of their full-time employees were covered, but the rate was changed to 70 percent.

“If they have to live with this requirement, then more employer-friendly rules are obviously welcome,” said Susah Nash, a partner at McDermott Will & Emery LLP who advises clients on how to comply with the law.

“This gives employers more breathing room to get the hours-counting under control,” she added.

She said the most difficult part of the law was that workers needed to be classified as full-time or part-time. But it isn’t always simple to determine if they worked more than 30 hours per week.

For example, the calculations can be tricky for a restaurant that hires more workers over the summer, or a holiday store that only employs people during certain times of the year. Plus, sectors such as health care or teaching have complicated ways to measure hours. On-call workers and adjunct professors can be hard to quantify.

The time extension will allow employers to look back over a period of months to determine the average hours worked by their employees, and plan insurance coverage accordingly.

“The extra year does give some additional time for those types of assessments,” said Nash. “It was a welcome relief in that regard.”

But the transition will still be a bumpy one, and it's still not going to be easy for businesses.

"While an additional year before the mandate goes into effect is certainly a good thing for small and mid-sized employers, these continued delays underscore the huge complexity this law poses to smaller firms,' said Molly Day, a spokesperson for the National Small Business Association. She said that businesses have reported spending an average of 13 hours and $1,274 per month just on the administrative aspects of understanding the Affordable Care Act.

Business advocacy groups have long been lobbying for extensions and relaxation on the rules. In general, they’re pleased with the recent announcement – but are still asking for more.

The National Restaurant Association said that the flexibility will be good for employers with workers whose hours vary.

“The rule also provides a phase-in for the smallest employers who are subject to the employer responsibility provision of the law,” the association said in a statement.

Though it also expressed concerns about the future, saying that many restaurants will still struggle to implement the law due to difficulties in defining what a full-time employee really is.

America’s retail sector employs more than 40 million workers.

The National Retail Federation (NRF) also applauded the extension, commending the Obama Administration for “recognizing the enormous complexities of the Affordable Care Act, and its agility and flexibility in working with retailers and others in crafting these much-needed and commonsense reforms and revisions,” it said in a press release.

The NRF represents a variety of businesses from discount and department stores to chain restaurants and Internet retailers.

“It doesn’t always feel good to be right,” said Amanda Austin, director of Federal Public Policy at the National Federation of Independent Business, in a statement.

She said that the news “is simply the latest indicator that this law is not ready for prime time and has systemic flaws that need to be corrected permanently.”

Though employers are relieved, for many employees it's simply another year to wait, but for others the rules could have a bigger impact.

"The delay adversely affects low-wage workers who have been expecting health care coverage at an earlier date," said Sasha Hammad, the executive director of the Retail Action Project, an organization of workers from the retail industry.

"The larger issue at play is that many retail and other service workers will not qualify at all for employer-based health care because their hours have been systematically cut as a means of avoiding paying for benefits," she added.