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Side Effects: Let the Employer Penalties Begin

Posted By Vivek Rajasekhar On May 4, 2010 @ 1:00 pm In Obamacare | Comments Disabled

[1]

Fans of Obamacare promised [2] it would be good for small and large employers alike.  They should’ve checked with employers first.

Mercer [3], a human resources consultancy, did just that.  Its latest annual survey of businesses finds that “[38 percent] of the nation’s employers…have at least some employees for whom coverage would be considered ‘unaffordable’ under the newly enacted Patient Protection and Affordable Care Act (PPACA).”

Under Obamacare, these employers may get slapped with penalties for not giving these workers what the Feds decide to be an appropriate level of coverage.  They don’t really know for sure, though, thanks to Obamacare’s opacity and its Byzantine layers of regulations.

For example, Obamacare may deem a worker’s job-based health coverage “unaffordable,” based on the worker’s household income.  In that case, the worker can get a government subsidy to buy coverage through a government managed insurance exchange… and the employer will get hit with a $3,000 fine for that employee. But employers rarely know what their workers’ household income is.  Consequently, they can only guess at how many penalties they may incur.

Part-time employees raise another problem. Under Obamacare, employers must offer coverage to anyone working as few as 30 hours per week. Practical mini-med plans, which employers use to offer limited coverage to these workers, will no longer be an option. Obamacare thus incentivizes companies to limit part-timers to fewer than 30 hours per week to avoid incurring failure-to-cover penalties.

Obamacare will weigh heavier on small employers than large ones.  While 33% of large employers do not cover part-time employees, that number rises to 45% when all businesses are included.  Nearly a third (31%) of all large employers may be slapped with “unaffordable coverage” penalties, but 38% of small- and mid-sized (10-499 employees) employers may wind up paying this fine.

As Heritage’s John Ligon notes [4], Obamacare is bad news for all sizes of businesses—and their workers:

The new health care law will impose new compliance regulations, employer mandate taxes, taxes on business “flow-through” and investment income, and numerous indirect costs on small- and medium-size companies. Altogether, these constraints will dramatically affect companies’ per-employee costs, firm-level allocation of labor, desire to take on health coverage, and motivation to grow both in terms of income and employment.

The way forward is clear:  repeal Obamacare, and start over to get it right.

Vivek Rajasekhar currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/About/Internships-Young-Leaders/The-Heritage-Foundation-Internship-Program [5]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/05/04/side-effects-let-the-employer-penalties-begin/

URLs in this post:

[1] Image: http://www.foundry.org/tag/side-effects/

[2] promised: http://docs.house.gov/energycommerce/EMPLOYERS.pdf

[3] Mercer: http://www.mercer.com/summary.htm?idContent=1378875

[4] Heritage’s John Ligon notes: http://www.heritage.org/Research/Reports/2010/04/Obamacare-Impact-on-Businesses

[5] http://www.heritage.org/About/Internships-Young-Leaders/The-Heritage-Foundation-Internship-Program: http://www.heritage.org/About/Internships-Young-Leaders/The-Heritage-Foundation-Internship-Program

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