Obamacare Delay: What it Means for Employers

July 3, 2013, 7:30 PM

By Angus Loten, Adam Janofsky and Caitlin Huston

The Obama administration’s unexpected announcement Tuesday that it would delay for at least a year a key requirement of the new health-care law— penalties under the employer mandate—is prompting some small employers to ponder what the reprieve means for their firms.

Firms with 50 or more full-time workers would’ve faced penalties of at least $2,000 for every uninsured employee, starting in January. But now, they have another year to plan for this requirement under the law.

Many business owners in recent months have considered strategies to keep their company’s headcount below the 50-employee threshold, at which point the employer mandate kicks in under the law. Some were planning for hiring freezes or deliberately converting some of their full-time workers into part-timers, in order to avoid the penalties.

Now, as a result of the delay, David Lewis, President of Operations Inc., which provides human resources consulting primarily to small businesses with 20 to 100 employees, says these businesses can ‘unfreeze’ their hiring plans without worrying about the consequences. “It’s going to completely change the strategy that companies thought they were going to employ” this year, he said.

Other important takeaways for business:

You have more time to assess coverage options. Roughly half of 889 small-business owners surveyed in March by The Wall Street Journal and Vistage International said they simply didn’t know if providing health insurance in 2014 would be more or less costly than paying the penalties for not providing coverage. Now small employers can wait—at least 12 more months– to figure out what kinds of coverage will be available and what they would like to offer.

David Burton, general counsel of the National Small Business Association, a Washington-based lobby group, said many owners have been unable to plan ahead for the January deadline because they had no way of knowing the cost of premiums until the law takes effect. “Until the actual rates are in front of them, it’s hard to make any decision,” he said. The extra time gives business owners an opportunity to better understand what their obligations will be under the law, he said.

You might able to gain an edge in recruiting. Firms with perks, including health-care benefits already in place, tend to attract better workers in the labor market. By setting up employee coverage plans now, while competitors wait out the delay, your business will look more attractive to the best and brightest recruits.

Anthony W. Mongeluzo, president of Pro Computer Service LLC in Moorestown, New Jersey, with 41 employees, says he was prepared for the law to take effect on schedule. “We expect to have 50 employees next year and I decided let’s just go with the benefits,” Mongeluzo said after hearing that the penalties would be waived until 2015. “I was diving in headfirst.” He says he believes the more robust benefits will help attract new talent as the business grows, such as new information technology technicians.

You can use the extra cash to renew spending plans. Many employers were anticipating a big jump in operating costs as a result of the requirements they face under the health-care law- particularly those who have young, healthier workers, such as in technology or software, whose premiums might rise.  More than three quarters of the small-business owners in The Wall Street Journal/Vistage International survey said they expected their health-care plans to cost more next year under the new law.

Any cash set aside to cover these higher costs can now be re-invested into the business, in the form of lower prices, new equipment or bigger facilities.

Richard Stark, president of Ziegler’s NYPD LLC, a pizza chain based in Phoenix, Ariz., said that the delay will help keep his business on a growth plan. “The capital will be redeployed into new stores and new restaurants. We’ll potentially be able to earmark some dollars for training and development of our team members,” he said.

Ziegler’s NYPD currently provides health benefits to roughly 10% of its 400 employees. The new law could potentially cost the business $200,000, Stark says.

Others, like Kevin Tindall, owner of Tindall and Ranson Plumbing and Heating in  Princeton  N.J.,  say the year delay won’t make much of a difference, since he still doesn’t know the baseline price of healthcare costs for his 20 employees.

“It just makes it unpredictable for a year more,” Mr. Tindall said.

You might want to give some staffers raises. This week’s windfall for employers is a setback to many employees, who might face penalties of their own if they don’t have coverage as individuals through an employer, spouse or other means.

The provision under the law that requires individuals to carry health coverage, or pay a fine, is still in effect come January. Low-wage earners, who can’t afford their workplace plans, may be eligible for Medicaid or seek coverage through a government-run exchange. If that’s still too costly, they may simply opt to pay a small penalty, or could apply for a “hardship” exemption.

“The likelihood is that the employee is going to have to pay more, and maybe a lot more” for individual coverage than he or she might have paid for employer-sponsored coverage, said Mr. Lewis, of the human resources consulting firm.

On July 19th, 2013, posted in: NEWS by

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