Perils ahead

Two days before Independence Day, the Obama administration launched a firecracker of an announcement: It would delay by a year the employer mandate set to go into effect Jan. 1, 2014.

Employer groups were jubilant, either because companies with 50 or more full-time employees were worried about the complexity of the reporting requirements or simply did not want to face a financial penalty for not providing health insurance to their workers.

But almost as soon as the announcement was made late Tuesday, the questions started flowing. Among them: Why was the delay done? How will uninsured employees at companies with 50 or more full-time employees who would have received health insurance through their employer get coverage in 2014? Might this mean delays for other parts of the Patient Protection and Affordable Care Act, which also face strong opposition from interest groups? And how will it affect different employment sectors, including healthcare employers?

Many experts say that as long as the Obama administration doesn't put off other key parts of the law, the employer mandate delay won't have a major practical effect on coverage, and could be a good move if it leads to simpler and better rules for employer coverage and reporting. But they warn that this could open the door to pressure from various interest groups for further delays and changes to the law, and embolden Obamacare foes to step up their efforts to repeal the law entirely. Up to now, the administration has stood firm against most efforts to modify or delay the law's provisions.

Why the delay? The Obama administration says businesses simply didn't have enough time to implement the coverage mandate and reporting requirements, and the delay was meant to give the administration time to work with business groups to simplify the reporting requirements and adapt coverage and reporting systems, according to a blog entry posted Tuesday by Mark Mazur, assistant treasury secretary for tax policy.

But Robert Laszewski, president of consulting firm Health Policy and Strategy Associates, thinks the administration had political motives heading into the 2014 congressional elections. “The bottom line is that Obamacare was looking like it was about to be successfully labeled a job killer and the administration wanted to avoid that,” Laszewski wrote in a Tuesday blog post.

Throughout the year, many businesses had threatened to scale back employee hours and limit hiring to avoid having to provide employees working 30 or more hours a week with health coverage, the definition of full-time workers under the ACA. It's unclear what they will do now given the mandate delay until 2015.

“The delay gives employers a chance to see just how the overall law will impact the health insurance market before they make any final decisions,” Laszewski added. “It also gives the Obama administration a chance to reconsider many of the new law's regulations that have rankled employers.”

While 94% of companies with 50 or more full-time workers already offer coverage to their workers, according to a Kaiser Family Foundation survey, it's estimated there are 10,000 companies of that size that don't offer coverage, including many chain restaurants and big-box retailers, accounting for 1% of the U.S. workforce.

Uninsured workers who find themselves out of luck, at least in 2014, shouldn't necessarily fret. That's because they will be able to buy coverage through their state's individual insurance exchange. If they earn under 400% of the federal poverty level, they are eligible for a federal tax credit, which they couldn't access if they received employer coverage. The public exchanges not only may give these employees more plan choices, but they also may end up paying less given the subsidy.

“Frankly, for a lot of young workers like those in retail, the deal in an exchange will be better than what they would get from their employer,” said Sabrina Corlette, project director at the Center on Health Insurance Reforms at Georgetown University's Health Policy Institute.

It's expected that the mandate delay will modestly increase the cost of federal subsidies in the exchanges. But from a federal budget standpoint, that could be offset by a reduction in tax deductions for employer-provided coverage.

The administration is slated to release guidance this week on the effect of the delay on the rest of the law. But most observers said the individual mandate, the centerpiece of the ACA, is unlikely to be delayed because it's critical to the law's coverage expansion and insurance market reforms.

Still, healthcare reform supporters are nervous. “One has to hope, however, that the administration has thought through the ramifications of this delay for the other provisions,” wrote Tim Jost, a law professor at Washington & Lee University who closely tracks the law, in a blog post Tuesday.

Jost raised the question of how the IRS and the state exchanges will know whether individuals are eligible for subsidies, since the law states that subsidies are available only to those not offered qualifying coverage by their employer.

There's also likely to be political fallout from the decision. Congressional Republicans have jumped on the delay as a sign that Obamacare is failing and should be repealed entirely.

On the ground, the administration is facing a tough slog getting the complicated exchanges ready by the Oct. 1 enrollment deadline, particularly in the 33 states where the federal government is running them. And the feds and the states that are running their own exchanges are racing to get consumer outreach programs ready. Even though the administration has delayed only the employer mandate, many uninsured Americans—who surveys show are woefully uninformed about the law—may think the mandate on individuals to obtain coverage also has been put off. This complicates the public education campaign.

“I worry that a lot of people will confuse this with the individual mandate and we'll see more people not getting coverage,” said Chas Roades, chief research officer at the Advisory Board Co.

Different employment sectors, including those in healthcare, will be affected differently by the employer mandate delay. One industry that got a respite is home health, where many firms currently do not provide coverage for their workers.

Roades said small and medium-size home health companies have been considering whether to offer coverage for the first time or to send their employees to the exchanges for coverage and pay the ACA's fine.

“This will delay that decision a little bit,” he said.

About 62% of home health providers would face penalties under the employer mandate, according to an industry survey conducted this year by the National Association for Home Care & Hospice. The law assesses a $2,000 annual penalty per employee on employers with 50 or more full-time employees who do not offer qualifying coverage to them. The penalty does not apply to the first 30 employees.

William Dombi, vice president at the NAHC, said home-care providers and some hospice facilities base their business models on keeping labor costs low and have limited ability to absorb higher costs—either because they rely on fixed fees from Medicare and Medicaid or because their typical clients have low incomes. He noted that in some states, Medicaid pays as little as $10 an hour for home-care services, and providers can't afford to offer health insurance and other benefits given that level of payment.

The Medicare Payment Advisory Commission reported that the profit margin for home-care firms from Medicare patients was 14.8% in 2011. But Dombi said the profit margin for privately insured patients is only 2%.

Dombi's group has lobbied for home care and hospice providers to be permanently exempted from the ACA's employer mandate.

Hospitals as employers are expected to be less affected by the employer-mandate delay because they typically offer relatively generous health benefits to their employees. But it could affect benefits for nurses and staff who work fewer than 40 hours a week.

For instance, 24-hospital Sutter Health, based in Sacramento, Calif., has faced repeated nurse strikes in recent years partly because of its move to drop coverage for part-time nurses, according to union officials. Sutter specifically cited increased costs from the federal healthcare law's employer mandate as a reason for dropping coverage for nurses working less than 30 hours each week.

“The hospital's just using this as an opportunity to cut us all off,” said Rochelle Pardue-Okimoto, a nurse at 527-bed Alta Bates Summit Medical Center in Berkeley.

Sutter's move could apply to about one-third of the 2,000 nurses at Alta Bates, including Pardue-Okimoto, who works 28 hours a week and is nine months pregnant. “They really would be leaving a lot of families out in the cold with no healthcare, a lot of nurses, people that have dedicated their lives to providing healthcare to patients,” she said.

Sutter officials did not respond to questions about how the employer mandate delay would affect its health benefit offerings to nurses.

But hospitals as providers are not happy about the delayed mandate. In a written statement, Richard Umbdenstock, president and CEO of the American Hospital Association, called it “troubling.”

“The goal of the ACA was to extend coverage to the uninsured, which required a shared responsibility from all stakeholders,” he said. “We are concerned that the delay further erodes the coverage that was envisioned as part of the ACA.”

The delay also could impact providers by prompting more people to enroll in exchange plans with relatively high deductibles and cost-sharing. The Advisory Board's Roades said hospitals could get saddled with more uncompensated care and bill collection problems because of exchange enrollees' inability to afford the higher cost-sharing.

Reform supporters hope this is the last major implementation delay. “This was a bit of a shock to those of us hoping everything was on schedule,” said Washington & Lee's Jost. “I hope this doesn't lead to other changes, because we've got millions of Americans without health insurance and a lot of them have some hope of getting coverage under this legislation.”

Follow Jonathan Block on Twitter: @MHjblock