Employers Lobby to Weaken Insurance Mandate
Wednesday, July 13, 2011
Employers Lobby to Weaken Insurance Mandate
In Implementing Law, Much Will Ride on the Details; Who
Qualifies as a 'Full-Time' Worker?
By: Janet Adamy, Wall Street Journal
It is three years before most of the new health-care law kicks
in, but already some of America's largest employers are peppering
the Internal Revenue Service with concerns that making the changes
will be far more complex than they anticipated.
At issue is one of the law's central requirements: employers
with 50 or more full-time workers must offer affordable insurance
or pay a penalty. It sounds simple enough. But in crafting the
rules, the IRS and two other federal agencies are now tackling
basic yet messy questions, such as who counts as a full-time worker
and how do companies measure whether insurance is "affordable."
In one of more than 200 submissions made recently to the IRS,
Wal-Mart Stores Inc., Gap Inc., United Parcel Service Inc., Hilton
Worldwide Inc. and others have pushed for a lengthy grace period
that could stave off penalties for a year or more after certain
workers are hired. The result could undermine some of the law's
intent to insure those who can't afford coverage. Large employers
also have met with White House officials to press their case.
Retailers, restaurants and other companies that rely on
seasonal, temporary and other workers with flexible schedules, say
it's hard to figure out who is a full-time worker. That could cause
the employer to enroll and drop them from coverage, potentially
churning them through new state-run insurance exchanges or the
Medicaid federal-state program for the poor, as their hours
fluctuated.
Moreover, companies are worried about another standard that
requires they offer care that is "affordable," or roughly 9.5% of
an employee's household income. The employers say they can't
calculate that without asking employees how much their spouses or
dependents earn-a potential privacy violation that may not be
verifiable, either.
"The uncertainty of the regulatory process and the many rules
that are yet to be clarified and fully defined are worrisome for
our members," the National Restaurant Association, the industry's
main lobbying group, wrote in a letter to the IRS last month.
Mark Iwry, a deputy assistant secretary for retirement and
health policy at the Treasury Department, said the agency is
"encouraged that stakeholders have responded favorably" to its
informal, early idea for full-time employees. The Obama
administration says the agencies are working quickly to give
employers guidance, and is weighing how to handle the affordability
measurement.
The debate centers on how federal agencies define a full-time
worker. The law itself, signed by President Barack Obama in March
2010, defines a full-time employee as one who works at least 30
hours per week on average in a given month.
Once classified as a full-time worker, the employer is obligated
to provide affordable health care or pay a penalty of $2,000 per
worker, excluding the first 30 workers.
In meetings with White House officials starting last year,
numerous employers argued that a one-month average isn't long
enough to determine whether a worker is a true full-timer. Census
Bureau data shows that six million, or 5.6% of private-sector
employees, work variable hours.
In response, the IRS in May floated the idea of giving employers
a "look-back" period of between three and 12 months to determine
whether certain workers met the full-time definition. Only then, if
the employee hit the target, would the employer have to start
providing insurance or pay the penalty.
Steakhouse chain Texas Roadhouse Inc. predicts that a look-back
period would significantly ease its insurance costs. Waiting to
enroll workers for a year or more will cut in half the number of
additional workers it will have to insure in 2014, said Mark
Simpson, a senior director at the chain. Turnover inside its
restaurants averages 100% per year, meaning most new hires would be
gone before they qualified.
Mr. Simpson said each restaurant worker generates about $2,000
in profit for the company a year. That's equal to the penalty the
chain would pay per worker if it didn't cover the 3,200 additional
workers it estimates could fall under the full-time definition by
2014 if the look-back is employed. He said the firm needs the grace
period to make sure it is providing insurance to true full-time
workers, not just those who hit the criteria for a brief
period.
Supporters of the law say the proposed look-back period is an
attempt by employers to cover fewer workers. They point to a
provision in the law that says group health plans and other
insurance providers can't apply waiting periods exceeding 90
days.
A long waiting period "could restrict workers' access to
comprehensive and affordable coverage in a manner inconsistent with
Congress's intent," said Sen. Tom Harkin (D., Iowa), chairman of
the Senate health committee.
Meanwhile, employers cheered the idea and are pressing the IRS
to go further. An umbrella group called Employers for Flexibility
in Health Care, which represents at least four dozen big employers
and trade groups, last month asked the IRS to ensure that all
part-time, temporary and seasonal hires wait up to 12 months, plus
an additional 90-day waiting period, before they qualify for
insurance.
Not having a sufficient waiting period, including for new
part-time, temporary and seasonal workers, "may lead to employers
dropping the coverage because these employees will be eligible for
subsidized coverage" through insurance exchanges run by states, the
group said in a letter, signed by Wal-Mart, Gap, UPS, Hilton and
others. "The ultimate result would be increased costs for the
federal government."
A senior administration official said the IRS floated the
waiting period to prevent workers from dropping in and out of
employer-sponsored insurance, "creating potentially a lot of
hassle, confusion and inefficiency," and that its suggestions so
far aren't intended to allow employers to avoid law compliance.