Small businesses with fewer than 50 workers have always been exempt. ACA delay sparks new mandate fight

Once again, it’s employers who are getting a break from their Obamacare mandate – and that’s sure to increase the pressure on the Obama administration to delay the mandate for individuals, too.

Regulations announced by the Obama administration Monday give two levels of delay to employers who would have had to cover their workers next year. Some businesses will get an extra year – until 2016. And the bigger businesses that do have to worry about the mandate will have it phased in over two years.


It’s the second round of delays to the employer mandate, which will require all businesses with 50 or more full-time workers to provide health coverage or pay a fine. The mandate was originally supposed to start this year – until, under pressure from business groups, it got pushed back until 2015.

Under the new rule, the Treasury Department said businesses with fewer than 100 workers would not be required to cover their workers in 2015 or face a fine. It gave bigger businesses with more than 100 workers extra time to ramp up coverage.

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It’s only the largest employers who will be affected, as the White House points out. The group that will get the delay until 2016 — businesses with between 50 and 100 workers — are just 2 percent of all employers in the country. And the businesses with more than 100 workers, the main ones that will feel the weight of the mandate, are another 2 percent of the nation’s employers, and many of those big companies already provide health insurance for workers.

But the optics are still going to cause big headaches. Now that businesses are getting another break, the Obama administration will have to brace for the return of a huge political problem: the demands for regular people to get a break from their own fines if they don’t buy health coverage this year.

It will be a major test of the new White House congressional operation — especially with the addition of Phil Schiliro, whom President Barack Obama brought back into the fold to coordinate Obamacare legislative strategy, including holding the line on repeal efforts.

Most Americans still have to get health coverage this year or pay a fine, a source of political headaches as people struggled to sign up for coverage during the early website glitches. The federal enrollment website is working better now, but many Americans will still have to decide whether it’s better for them to sign up for coverage or pay the fine.

Republicans have pushed the “fairness” line since the first delay: If businesses can get a break, why can’t individuals? They even forced a vote on the issue in the House last year, and the argument was so potent that 22 House Democrats voted to postpone the law’s individual mandate for a year.

Sure enough, the calls started again Monday, as soon as Republicans could hit “send” on their “delay Obamacare” emails.

“It’s time we give every American the same relief from the law that the President has granted to businesses by working toward a legislative solution to delay Obamacare for everyone,” said House Majority Whip Kevin McCarthy.

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“Where is the relief for American families who are suffering from this law?” asked Rep. Diane Black (R-Tenn.). “By providing more relief for employers without doing the same for individuals, the President is again sending the message that businesses deserve favorable treatment over the hardworking American people.”

The only thing the Republicans rush of statements didn’t quite agree on was whether to delay the mandate, delay the whole law, or just go full repeal, as Senate Minority Leader Mitch McConnell did.

“The White House seems to have a new exemption from its failed law for a different group every month. It’s time to extend that exemption to families and individuals—not just businesses,” said McConnell.

It’s an argument that ignores the policy realities of Obamacare. Unlike the employer mandate, the individual mandate is directly tied to the requirement that insurers cover everyone with pre-existing conditions. If the administration delayed the requirement for most Americans to buy health coverage, it would decrease the pressure for healthy people to sign up, and the health plans could end up with too many sick people. That would make the coverage more expensive for everyone who’s left.

But that’s a hard argument to make in the heat of a floor debate, and it didn’t work on those 22 House Democrats last summer. It could be even harder for the Obama administration and the other Democrats to hold the line now – because now they have to explain why businesses got a break not once, but twice.

A Democratic leadership aide says the leaders have been sending talking points to the members about the need to resist repeal or delay efforts, and noted that “our members are well versed on these points” about why a delay in the individual mandate can’t work on policy grounds.

Small businesses with fewer than 50 workers have always been exempt from the Affordable Care Act coverage requirements, but the law originally required all other businesses to start covering their workers or face penalties beginning Jan. 1, 2014. The White House last July pushed that start date to 2015, in response to concerted pressure from the business community.

The new policy Treasury announced gives the mid-size businesses — those with 50 to 99 workers - another year to adapt to the changing health care marketplace. Larger businesses, most of which already offer health benefits, still need to start covering full time workers next year — but not all of them.

The shift is meant to “ease the transition to a 30-hour week,” a senior Treasury official said.

Obama administration officials say there’s another reason for phasing in the employer mandate: It makes the employer requirements more parallel with the individual mandate, which is already phased in.

Under the individual mandate, the fines are relatively small this year — $95 or 1 percent of the person’s income, whichever is greater — but they’ll still have strong symbolic importance. They’ll grow larger in 2016, to the greater of $695 or 2.5 percent of income.

Likewise, the large businesses that have to comply with the mandate next year will now have to cover just 70 percent of their workers. A year later, it will rise to 95 percent.

The move was welcomed by many employer groups, who have been arguing that the law encourages them to cut workers’ hours. It could also provide some cover for congressional Democrats, who have increasingly expressed concern over the issue.

But it’s just the latest in a series of major changes and delays the Obama administration has made leading up to the rocky launch of the new health insurance exchanges.

Some Republicans say it’s just more evidence that the law itself is falling apart. House Speaker John Boehner tweeted that “once again, POTUS is rewriting law on a whim … breeding confusion & eroding confidence in him & his #hcr law.”

The White House has said the changes are meant to respond to criticism and problems with implementation, but Republicans seized on the changed employer rules as an issue of fairness.

The administration claims that it has authority to make the new changes, even changes that conflict with language in the law itself. A Treasury Department spokesperson said the move is “an exercise of the Department’s longstanding authority to grant transition relief when implementing new legislation,” and that it’s authorized by a section of the tax code.

“In the tax code, the secretary has very broad authority to implement tax law in a way that benefits the tax administration and we think phase-in approach really is a way to administer the law better,” another administration official said. “The basic idea here is that you want to get this right in the long term.”

The new more lenient guidelines do require employers to confirm that they are not cutting hours or laying off workers to avoid the penalties - which has been part of the ongoing controversy about the law. However, it’s not clear how the IRS will verify what employers report. Officials described the process as “self-attestation.”

The new policy modifies regulations that show how the health law reaches into different parts of the economy – and the blowback that’s been directed at the Obama administration.

The change accommodates a complaint from employers with large seasonal workforces like the hospitality industry. Under the new policy, people who usually work less than six months won’t be considered full time.

It provides a short-hand method for estimating the hours of adjunct faculty, who may be paid by the course but spend many more hours working outside the classroom. And it formalizes a commitment the administration had made verbally that volunteer firefighters and paramedics won’t be counted as full-time employees – a prospect that could have exploded the costs of local emergency services.

Earlier Monday, the Obama administration also made an adjustment to the enrollment deadline for March 1 coverage because of work that will be done on the Social Security Administration’s online systems next weekend. The administration said it would open a special enrollment period for people who couldn’t finish their application by the deadline next Saturday.

Jennifer Haberkorn contributed to this report.