Tag Archives: employer mandate

Is it Retaliation to Cut Employee Hours to Avoid Obamacare Mandate?

pillsAfter a couple of delays, the employer mandate portion of Obamacare is now scheduled to take effect at the beginning of 2015. At least, a partial mandate is scheduled to start then for some employers. Companies with at least 100 employees will have to cover at least 70% of their full-time employees by then. At the beginning of 2016, the mandate will kick in for companies with 50 to 99 employees. And larger employers will have to cover at least 95% of their full-time workforce.

Because a full-time employee is one who works at least 30 hours a week, there has been a lot of speculation that employers will cut employees hours to avoid having to provide health insurance. In fact, it has gone beyond speculation: A number of major employers, both public and private, have announced that they will change employee schedules to avoid having to comply with the mandate. Many more have quietly made the same decision, perhaps not advertised in public pronouncements, but made clear to their managers and employees in workplace memos, job descriptions, and policy changes. (Check out a list, along with links to supporting documents, in ObamaCare Employer Mandate: A List of Cuts to Work Hours, Jobs, from Investor’s Business Daily.)

A couple of weeks ago, the lawyers started speaking up. According to an article in the San Francisco Daily Journal (available only by subscription — sorry!), management lawyers said they would be concerned if a client came to them proposing to cut hours to avoid the mandate. The reason? The law includes a retaliation provision, prohibiting employers from taking adverse action against employees because they have health insurance.

Some open questions were identified in the article, including whether the retaliation prohibition protects employees whose hours are cut now, well in advance of the mandate, and whether it offers any protection to new employees who are hired at less than 30 hours a week. Like much else about Obamacare, these issues will have to be resolved in the courts.

Another Delay for the Employer Mandate

pillsAnother day, another delay in implementing the Affordable Care Act (also known as Obamacare). Originally, the employer mandate — the part of the law requiring employers with at least 50 employees to provide affordable coverage to their full-time employees or pay a fine — was supposed to kick in weeks ago, at the beginning of 2014. Last year, the Obama administration delayed the mandate for a year, until the beginning of 2015.

This week’s further delay comes in two parts:

  • Mid-range employers (those with at least 50 but fewer than 100 employees) will have another year to provide coverage. For these employers, the mandate will now kick in on January 1, 2016.
  • Larger employers (those with at least 100 employees) won’t have to cover everyone right away. For 2015, these employers will have to offer coverage to only 70% of their full-time employees (Remember, “full-time” under the law means employees who work at least 30 hours a week.) For 2016, 95% of full-time employees will have to be offered coverage.

These delays (or “transition relief,” as a Treasury Department official described them in an article in the New York Times) appear in final regulations from the IRS interpreting the employer mandate portion of the law.

 

Employer Mandate: Headed to the Supreme Court?

supctThe past month has been chock full of developments on the employer mandate front, and there may be more to come. Last month, the federal Court of Appeals for the Fourth Circuit upheld the mandate, which requires larger employers to provide affordable healthcare coverage to full-time employees or pay a fine. (The opinion is Liberty University v. Jacob Lew et al.; there’s a nice explanatory piece about it over on SCOTUSBLOG.) The Fourth Circuit’s opinion upheld the employer mandate as a valid exercise of Congress’s powers to tax and to regulate interstate commerce.

Just a few days later, the Obama administration announced that it was postponing the employer mandate for a year, until the beginning of 2015.

Then yesterday, the Fourth Circuit issued a stay in the mandate case, to give Liberty University time to file a petition for certiorari asking the Supreme Court to hear the dispute. No tea leaves yet on whether the Court will agree to hear the case or how they will decide it if they take it up. Still, what a difference a month makes in the life of a new government program.

Obamacare Employer Mandate Postponed to 2015

In an announcement that seemed to take everyone by surprise, the Obama administration yesterday issued a statement that it would not enforce the employer mandate of Obamacare until 2015. More specifically, the statement indicates that the Obama administration won’t enforce the law’s reporting requirements for employers or assess the “shared responsibility” payments (fines for failing to provide adequate, affordable healthcare) until 2015. These provisions were supposed to take effect at the beginning of 2014.

This change was billed as the administration’s effort to “listen to the business community.” However, the effects of the change could be much more widespread. The deadline for the individual mandate has not changed; we all still have to have insurance coverage by January 1, 2014, or pay a penalty. I will refrain from detailing my thoughts about the administration giving a break to the “business community” while the actual humans are still on the hook. But postponing the employer mandate will make the individual mandate more challenging. For example, whether subsidies are available to employed people who buy their own insurance depends on the quality and cost of insurance available to them at work. If employers aren’t required to report on that, how is the IRS going to know who is eligible for a subsidy?

Postponing the employer mandate and reporting requirements also, frankly, gives employers more time to come up with ways to get around the law by restructuring their workforces (look for more job openings for employees to work no more than 29 hours per week), coming up with ways to offer the least coverage possible and pay the lowest penalties (like this scheme, which came to light only a few weeks ago), and so on.

Here’s an additional complication: The administration doesn’t seem to have the authority to require this delay. As noted in this article in Forbes, the effective date of the mandate is statutory. Congress said, right there in the law, that it applies to “months beginning after December 31, 2013.” Although the administration could choose not to enforce this part (as they did with DOMA before the Supreme Court overturned it), they might face a lawsuit over their decision. And, unlike the DOMA situation, there will be real people who are harmed by this delay.

 

Is There an Employer Mandate Loophole in Obamacare?

pillsIn the last few weeks, a number of articles have been published on a possible way for employers to game Obamacare. (The most influential one was Employers Eye Bare-Bones Health Plans Under New Law, in the WSJ.) Here’s the basic strategy: Offer a minimal health benefit plan (called a “skinny” plan), which doesn’t meet the essential benefits requirements. Then, pay the secondary penalty under the employer mandate if any employee wants more comprehensive coverage, gets it through a state exchange, and is eligible for a tax subsidy based on income.

Surprised? Me too, although not that employers are trying to avoid costs. What surprised me was that, based on reporting so far, it sounds like the Obama administration isn’t coming out loudly to say this won’t work. (Much more information is still needed here before anyone can say definitively whether employers can get away with this.)

The first step is to get a plan that offers “minimal essential coverage.” If you think that means it has to cover the ten categories of “essential benefits” we keep hearing about, like mental health services, prescription drugs, and hospitalization, you are not alone. But you are wrong. Those rules apply to individuals and small businesses, but not to the larger businesses that are subject to the employer mandate. For these employers, nearly any plan will do, as long as it covers certain preventive services without an annual or a lifetime limit (according to the WSJ article). It doesn’t have to provide coverage for surgery or hospitalization. As long as the plan offered meets this very low bar, the employer can avoid the primary penalty under the employer mandate: $2,000 per employee, not counting the first 30 employees.

The second step is to be ready to pay the secondary penalty under the mandate, for having inadequate coverage. Employers must pay $3,000 per employee for this penalty, which is imposed on employers whose plans don’t offer minimum value or are not affordable to their employees. If you’re wondering why an employer would want to pay a $3,000 penalty to avoid a $2,000 penalty, the answer is that this penalty is imposed only per employee who buys insurance through a state exchange and is eligible for a tax subsidy. Some employers are clearly betting that this won’t add up to many employees. For example, low-wage workers might not be able to afford comprehensive coverage, even with subsidies. High-income workers likely won’t be eligible for a tax subsidy if they want more comprehensive coverage. And, there are places to buy insurance outside of the exchanges, which eliminates the penalty.

Is this going to work? It’s unclear: Because it so obviously skirts the intent of the law, this strategy comes with plenty of legal risk. And who came up with the idea of letting the larger employers who provide so much health coverage in this country somehow skirt the “ten essential benefits” requirements? The WSJ article quoted a former White House adviser saying, “Our expectation was that employers would offer high quality insurance.” Which kind of makes it sound like this was a surprise to them, too.

Supreme Court Wants to Hear More About Health Care Reform

Seems like only a few months ago that the Supreme Court narrowly upheld President Obama’s health care reform law. That decision, combined with the President’s reelection and Democratic gains in both the House and Senate, appeared to spell the end of the fighting over whether the law would go into effect. Although there are still plenty of disputes over how the law will be implemented, what the final regulations will say, and so on, the core question of the law’s validity seemed to be settled.

Until last week, when the Court once again entered the Obamacare fray. The Court had previously dismissed a lawsuit brought by Liberty University challenging the health care law, based on its holding last summer that the individual mandate to purchase insurance was constitutional. Liberty University asked the court to reconsider, and last week it did. The Court vacated its decision not to hear the case, granted Liberty’s petition for rehearing, and sent the case back to the Fourth Circuit Court of Appeals. Once that Court issues a decision, the case could once more find its way back to the Supreme Court, as early as next year.

There are two issues in the Liberty case. The school is challenging the law’s employer mandate: the requirement that employers with more than 50 employees either provide health insurance for employees that meets certain financial and coverage requirements or pay a fine. The school is also challenging the law’s requirement that health care plans (whether purchased by an employer or an individual) must include contraceptive coverage, without a copay.

For more information on what the health care law requires, see Health Care Reform: What Employers and Employees Need to Know.