Archive | Insurance Company News – California

No, Obamacare Is Not A Good Deal For Young People In The Long Run, Not Even Close

Rate Shock: In California, Obamacare To Increase Individual Health Insurance Premiums By 64-146%. Progressives are becoming increasingly concerned at the prospect of millions of uninsured young people deciding to push the easy button next year by simply paying a very small fine rather than obtain health coverage.

  • Consequently, they have turned to a new argument to get those under 30 to act against their self interest by signing up for the Exchanges. Now we are being told that Obamacare will be a good deal for young people in the long run since whatever short-term losses they incur in the form of higher premiums will be more than made up later when they are older and get to pay lower premiums than they would in today’s market.
  • But those making these arguments haven’t offered any analysis to back up their claims. The conceptual point evidently is supposed to be intuitively obvious.  Once the time value of money is taken into account, the average young person will be worse off under Obamacare even if they live long enough to be a near-elderly person who pays premiums that are well below actuarially fair rates.
  • A recent study by the National Center for Public Policy Research shows that: About 3.7 million of those ages 18-34 will be at least $500 better off if they forgo insurance and pay the penalty. More than 3 million will be $1,000 better off if they go the same route.
  • Consequently, many more will opt to pay the extremely modest tax rather than fork over many thousands of dollars to purchase coverage that became substantially more expensive for young people thanks to the misguided pricing rules imposed by Obamacare. The risk that the law will fail in an “adverse selection death spiral” thus has gotten much larger.

What’s so bad about modified community rating?

  • Modified community rating essentially is an excise tax on people who buy health insurance. Those who choose to go bare avoid the tax entirely, but for those who do buy coverage, the tax is highly discriminatory, imposing the highest burdens on those who are young.
  • Imagine a state that tried to impose a sales tax in this fashion, where everyone would have to show an ID card and the amount of tax charged to 18 year olds would be 18% while those age 30 would only have to pay 5% and seniors would get a rebate.
  • People rationalize modified community rating on grounds that what goes around comes around. “Don’t worry kid. Someday you too will be old enough to enjoy premiums subsidized by youngsters your age. It all works out in the wash.”

*Modified from a Forbes.com article

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Tacking Health Care Costs Onto California Farm Produce

Farm labor contractors across California, the nation’s biggest agricultural engine, are increasingly nervous about a provision of the Affordable Care Act that will require hundreds of thousands of field workers to be covered by health insurance. While the requirement was recently delayed until 2015, the contractors, who provide farmers with armies of field workers, say they are already preparing for the potential cost the law will add to their business, which typically operates on a slender profit margin.

  • “I’ve been to at least a dozen seminars on the Affordable Care Act since February,” said Chuck Herrin, owner of Sunrise Farm Labor, a contractor based here. “If you don’t take the right approach, you’re wiped out.” The effects of the law could be profound. Insurance brokers and health providers familiar with California’s $43.5 billion agricultural industry estimate that meeting the law’s minimum health plan requirement will cost about $1 per hour per employee worked in the field.
  • Farm labor contractors generally rely on a 2 percent profit, and they say they will have to pass the added health care costs required by the law on to growers. Mr. Herrin, who can employ up to 2,000 farmworkers — many of them longtime employees — has been warning his customers of the coming price increase due to health insurance costs. “It’s made for some heated battles,” Mr. Herrin said of his talks with growers, who include his father-in-law, the owner of a Central Valley farm.
  • Across the country, employers in many other kinds of businesses are devising strategies to comply with or, in some cases, sidestep a new requirement to provide insurance for those who work 30 hours or more. But in the vast, fertile fields of California’s Central Valley, part-time labor is not realistic. Pruning, picking and packing produce is full-time, nearly year-round work. “You can’t put your ag workers on a 28-hour workweek like Starbucks, Denny’s and Walmart are considering,” Mr. McClements said.
  • There seems to be widespread agreement among agricultural employers, insurance brokers and health plans in California that low-wage farmworkers cannot be asked to pay health insurance premiums. “He’s making $8 to $9 an hour, and you’re asking him to pay for something that’s he’s not going to use?” Mr. Herrin said. The minimum compliant health plan for employee coverage under the new law will cost about $250 a month in California’s growing regions, according to insurance brokers, and includes a $5,000 deductible for medical care, although insurers cannot charge co-payments for preventive visits. “It’s unacceptable,” Mr. Herrin said of the cost.
  • The situation is complicated by the reality that many farmworkers apply for jobs with questionable identification, and farmers and farm labor contractors hire them anyway. (Employers say they must accept documents that look legitimate and can be penalized for directly asking if a potential employee is in the country illegally.) Employers are trying to spread the word, a tricky process in places where the mention of government oversight can stir fear.
  • Oscar Renteria, owner of Renteria Vineyard Management, a farm labor contractor based in Napa, has held meetings in Spanish to explain the health law to his 380 employees, some of whom may be in the country illegally. “They’re really nervous,” Mr. Renteria said. “Nervous they’ll be tracked and then somehow the possibility of being identified, and the fear of being deported or not being allowed to work. It comes up all the time in conversations when we outline the choices.”

*Modified from a NYTimes.com article

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ObamaCare Dropping Full-Timers at Schools, Local Governments

Health reform is now causing job turmoil across the country in three key groups that the White House has depended on for support—local government, school workers and unions.

  • School districts in states like Pennsylvania, North Carolina, Utah, Nebraska, and Indiana are dropping to part-time status school workers such as teacher aides, administrators, secretaries, bus drivers, gym teachers, coaches and cafeteria workers. Cities or counties in states like California, Indiana, Kansas, Texas, Michigan and Iowa are dropping to part-time status government workers such as librarians, secretaries, administrators, parks and recreation officials and public works officials.
  • This growing trend comes as three major unions have written to Democratic Congressional leaders Nancy Pelosi and Harry Reid warning that, because health reform is helping to push the work week to below 30 hours, it will “destroy the foundation of the 40-hour work week that is the backbone of the American middle class.”
  • Nearly three-quarters of government employers provide generous benefits to workers, funded by taxpayers, higher than any other industry, says the Kaiser Family Foundation.
  • But the quarter that do not are making rapid changes to the work week. To stop the wheels from coming off the school bus, school districts are doing the math, and are figuring out that cutting worker hours down to part-time status, or paying the mandate tax, or dropping part-time coverage is less expensive than offering health insurance benefits.
  • Cities across the nation are discovering that the extra expense from health reform will trigger layoffs and cutbacks in city services like public works, city jails, government workers in nursing homes, parks and libraries if they don’t push government workers down to part-time status (see below). Some plan to hire even more part-time employees to make up for the lost hours, city officials have said.
  • The irony is, health reform could fix the soaring pension and retiree health benefits owed by government agencies across the country, as numerous municipalities consider moving to a part-time workforce, analysis shows.

SCHOOL DISTRICTS

  • Schools throughout Indiana are cutting back the hours of teacher assistants, bus drivers, cafeteria workers and coaches to avoid having to offer them health insurance under the new federal employer mandate.
  • The Wake County Public School System in North Carolina is considering restricting its 3,300-plus substitutes to working less than 30 hours a week, effective July 1. The school district figured that, if just a third of these subs got employer health insurance, it would cost it about $5.2 million.
  • The Southern Lehigh School District in Pennsylvania voted to cut the hours of 51 part-time secretaries, custodians and cafeteria workers to avoid the health care mandate.
  • In Nebraska, public school districts have been contemplating cutting worker hours to avoid the extra expense of health reform. Attorney Karen Haase who represents roughly 150 school districts in the state, estimates thousands of non-teaching jobs, such as bus drivers, cafeteria cooks, teacher aides, janitors, and administrative workers, may see their hours cut, layoffs and hiring freezes.  
  • Between 1,000 and 1,200 of teacher aides, substitute teachers, administrators, cafeteria workers, bus drivers, and security officers and other workers in the Granite School District outside Salt Lake City, Utah, will see their part-time hours reduced due to the costs of health reform.
  • Already, colleges and universities have been cutting back hours of adjunct professors. Youngstown State University in eastern Ohio will limit the hours of non-union part-time employees like these professors to 29 hours a week or less to make sure that the university is not required to provide them with health insurance coverage under the new law.

MUNICIPAL WORKERS

  • Officials in Floyd County, Ind., recently announced plans to drop the hours of part-time government workers to below 30 hours a week from 34 because of health-reform mandates. Butler County outside Wichita, Kansas, now classifies part-time municipal workers as those who work fewer than 30 hours a week. 
  • Long Beach, Calif., is restricting most of its 1,600 part-time employees to on average fewer than 27 hours a week. City executives warn that without the move, their budget would soar $2 million due to higher health benefit costs. The city calculated that the federal penalty for dropping coverage completely for its 4,100 full-time employees would have been about $8 million, so instead, it’s opting to cut the hours.

UNION OPPOSITION

  • The trend in school and government workers getting hours cut comes as the number of unions opposed to health reform grows. The list includes: The United Food and Commercial Workers International Union; International Brotherhood of Teamsters; International Brotherhood of Electrical Workers; International Union of Operating Engineers; United Union of Roofers, Waterproofers and Allied Workers; Sheet Metal Workers International Association; UNITE HERE; and Laborers International Union of North America.
  • Union leaders James Hoffa of the International Brotherhood of Teamsters, Joseph Hansen of The United Food and Commercial Workers International Union and D. Taylor of UNITE-HERE recently sent a letter to Reid and Pelosi warning: “The law creates an incentive for employers to keep employees’ work hours below 30 hours a week. Numerous employers have begun to cut workers’ hours to avoid this obligation, and many of them are doing so openly,” adding, “the law as it stands will hurt millions of Americans including the members of our respective unions.”

*Modified from a Fox Business.com article

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Look out below! Work more, get less in Obamacare ‘cliff’

Be careful you don’t fall off the Obamacare “cliff” when the boss asks you to put in some overtime. Working more could ultimately mean thousands of dollars less for you under a quirk in the new health-care law going into effect this fall. This could prompt some people to cut back on their hours to avoid losing money.

  • “Working more can actually leave you worse off,” “It’s sort of an absurd scenario,” said Jonathan Wu, ValuePenguin.com’s co-founder. “It’s something for people to be aware of.”
  • In that scenario, an individual or family whose annual income surpasses maximums set by the federal government—if only by $1—will totally lose subsidies available to buy health insurance under the Affordable Care Act. The loss of those subsidies in some cases will mean that people potentially would have been better off financially if they had worked less during the year, Wu said. And they then would have to work significantly more to make up for the lost subsidy.
  • “I think they’d be surprised to see how drastic it is,” said Wu. “I’d be kind of shocked to see if I make $100 less (in total income each year), I get all these benefits, but if I make $100 more, I get nothing.” “You basically don’t want to fall in that hole,” said Wu, adding that he believed contractors and others with more control over their incomes would be apt to adjust their hours worked to avoid the subsidy cliff.

Under the ACA, federal subsidies in the form of tax credits to buy insurance on new state health insurance exchanges will be available to millions of people who can start enrolling on those exchanges Oct. 1. The subsidies are available to people or families whose incomes total 400 percent above the federal poverty level or less, and are designed to cap their insurance premiums at 9.5 percent of their total income.

Doing the math

  • For a single person, that FPL income maximum is $45,960 per year. The maximums are adjusted upward for couples and families until maxing out at $94,200 for a family of four. Under a scenario that ValuePenguin.com identified, a couple in Ohio, both age 50, would be eligible for subsidies worth $3,452 to purchase a so-called silver insurance plan—a moderately priced level of benefits under the ACA’s scheme—that costs $9,346 annually if they made up to $62,040 per year.
  • But if they made just $1 more than that, they would lose the subsidy. Wu noted that the couple then would have to earn at least $65,492 to make up for the lost subsidy.

In New York, a family of three whose annual income totals $78,120, would pay $12,784 for the second-lower-priced silver plan on that state’s insurance exchange. After getting a $5,363 tax credit, the family’s net cost for the insurance would be $7,421. But if the family earned even slightly more than $78,120, they would have to pay the entire $12,784 for the insurance because they then wouldn’t qualify for the subsidy. To make up for that, the family’s annual income would have to reach $83,483, Wu said.

*Modified from a CNBC.com article

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WellPoint Sees Small-Business Plans Slip Ahead of Health Law

WellPoint Inc., the second-biggest U.S. health insurer, said more small employers are scaling back benefits this year, a potential hedge against higher costs expected under the U.S. health care law.

  • While small businesses have been cutting back for years, the pace has quickened in 2013, WellPoint Chief Financial Officer Wayne DeVeydt said in a phone interview. Fewer individuals are buying plans outside of work as well, possibly because they expect a better deal when the law’s insurance subsidies debut in January, he said.
  • “We continue to see the pace actually accelerating,” DeVeydt said in an interview after the Indianapolis-based company announced quarterly earnings. “Is it accelerating because people are willing to go naked, so to speak, before the beginning of the year? There’s really no way to say for sure.”
  • The number of American workers holding full-time positions fell in June as part-timers hit a record after rising for three straight months, according to the Bureau of Labor Statistics household data. Part-time employment has been outpacing full-time job growth since 2008. Economists cite tough economic conditions as the root cause, with some saying President Barack Obama’s 2010 health care law exacerbates the trend.

*Modified from an Insurance Networking News article

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Union Fears ‘Destructive Consequences’ From Obamacare

The laborers union has added to organized labor’s drumbeat of dissatisfaction with the Affordable Care Act.

  • In a letter sent to President Barack  Obama on Thursday, Laborers International Union of North America President Terry O’Sullivan wrote that the law has “destructive consequences” for the types of health plans that cover millions of unionized construction workers and their family members.
  • The letter follows a separate one written last week by the heads of the International Brotherhood of Teamsters, the United Food and Commercial Workers and Unite Here, expressing similar concerns to Congress’s top Democrats, Sen. Harry Reid and Rep. Nancy Pelosi. The International Brotherhood of Electrical Workers took out print ads raising alarms about the law last week as well.
  • Mr. O’Sullivan zeroed in on some factors that could directly impact unionized construction workers who are typically covered by multiemployer plans. He noted that costs are rising for such plans because of the law’s benefit mandates. Moreover, a tax under the law would cost such health plans $63 per covered individual, or $630,000 for a plan covering 10,000 people, he wrote. The proceeds of the tax will be used to subsidize insurance companies offering health plans in the Health Exchanges.
  •  “In effect, ACA takes money from the pockets of each laborer covered by a health and welfare fund and gives it to for-profit insurance companies,” Mr. O’Sullivan wrote. Those added costs will eventually impact collective bargaining agreements, he said, making union construction companies less competitive than nonunion ones and resulting in less work for union laborers. For those impacted, a great resource for CSCS Card Mock Tests is needed. The unions need to be strong to surpass such hurdles in these demanding times.
  • Mr. O’Sullivan concluded: “Approximately 3 million laborers, retirees, and their families now face the very real prospect of losing their health benefits. This, I must remind you, was something that you promised would not happen.”

The laborers union, with about 570,000 members, is one of a few major unions that didn’t support enactment of Affordable Care Act, Mr. O’Sullivan reminded Mr. Obama. “Now, we have watched as the implementation of the law has progressed, our fears have become reality,” he wrote.

*Modified from a WSJ.com article

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Price, Price, Price: Health-Insurance Shoppers Have Priorities

The federal health overhaul’s big requirement that most people carry health insurance is still months away, but already insurers like Blue Cross & Blue Shield have a sense of what will matter most to consumers: price.

  • “To me, it’s all about money,” said Rob Roy, who compared plans in a consumer test for the insurer. Currently uninsured and working as a cook in a pub, Mr. Roy said he found the choices too expensive. He ended up opting for a competitor’s plan instead of Blue Cross.

To figure out who’s going to show up for the new marketplaces and what they want, companies have plunged into research. They have been setting up simulated exchanges for consumers to test-drive. WellPoint Inc., the insurer that may end up with the biggest presence on the exchanges nationally, has put about 55,000 people through these faux exchanges.

“You’re going to try to have a population of individuals who have never purchased this product,” said Raymond Smithberger, who oversees individual health plans at Cigna Corp. “It’s like buying a brand-new car if you’ve never driven before.” Cigna used the online simulations to help decide which state exchanges it would join, and to shape some elements of its coverage design.

  • Simulations by firms like Stonegate Advisors LLC, which conducted the insurer’s test-drive, have found that consumers often choose plans fairly quickly, without always looking in-depth at the benefit details. People with more health problems wanted richer coverage so they wouldn’t have to pay much to go to the hospital or doctor’s office.
  • Still, the focus on price, including the effect of subsidies, is a constant. Consulting firm Booz & Co.’s pretend exchanges showed that premiums were the most important factor in plan selection, followed by cost-sharing features like deductibles. McKinsey & Co., which tested about 150,000 consumers, found most would opt for smaller arrays of doctors and hospitals to achieve discounts.
  • “People were willing to trade off network access for price,” said Shubham Singhal, a McKinsey director who leads the firm’s health-care practice.
  • Blue Cross found the monthly premium was the most important thing for 48% of people, and one of the most important things for another 26%. It dwarfed other factors like prescription-drug coverage and copayments for doctor visits.
  • Blue Cross sponsored the simulated exchange last fall to get “a real-life glimpse into how people will behave,” said Jim Gallagher, the insurer’s vice president of marketing. The company tested around 500 people, but it struggled to enlist Hispanics, a key demographic; only four completed a Spanish-language version of the simulation.
  • On average, people spent just nine minutes on the process. And less than a third tried to access the definitions of key terms like “deductible.” That may raise concerns that they didn’t fully understand details of the plans, and insurers will need to help educate them, said Marc Pierce, president of Stonegate Advisors.
  • “I found it very difficult to compare the different options,” said Elise Loftis, who said she would want to seek advice from an agent. She wanted to know what the plans would cover in hospital costs. Her husband has had his hips replaced, which resulted in an infection and a second hospital stay, and the couple has a 3-year-old son. She chose a Blue Cross plan in the test.
  • The research is shaping Blue Cross’s decisions. The company is initially selling a “tiered” plan that requires consumers to pay more to see certain health-care providers, and next year it will roll out a new design with a smaller network, both approaches that can hold costs down.
  • As in the real exchanges, people had to enter income information to learn what federal subsidy they might get. Then they were shown tiers of plans, ranked as bronze through platinum, with platinum the richest and most expensive. They could also choose from three different insurers, and click to figure out details like deductibles.
  • Forty-one percent of the consumers said they would sacrifice a broad choice of doctors and hospitals in order to save money, even if their own doctor might not be in the plan’s network. Overall, Blue Cross plans were chosen by nearly 60%.
  • The insurer also isn’t offering any platinum plans to consumers, partly because the simulation showed they tended to draw people with significant health needs, a particular concern if it’s the only competitor with a platinum product.

A new, broad Blue Cross marketing campaign boasts of features it hopes will be inviting to consumers, like doctor ratings. Another ad focuses on the idea that consumers can get a refund the following year if they don’t use enough services to get through their deductibles—a design that tends to reward healthier people as well as encourage people to stick with Blue Cross.

*Modified from a WSJ.com article

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Why The White House Is Panicking About ObamaCare

Actors. Actresses. NFL football players. Baseball players. Librarians. Mayors. City councilmen. Members of AARP. The Obama administration is looking far and wide, leaving no stone unturned in a relentless search for…well…for help. Help with what? Help with getting people to enroll in health insurance plans this fall. And why is that?

Because the administration is facing the very real possibility that its signature piece of legislation may fall flat on its face.

  • Last week’s announcement that the employer mandate will be delayed for a year and that income verification for people getting subsidies will also be delayed are the latest signs of trouble. The next shoe to drop may be the failure for people to obtain (ObamaCare) insurance — even if it’s free or highly subsidized.

Consider this:

  • About one in every four individuals who are eligible for Medicaid in this country has not bothered to enroll.
  • About one in five employees who are offered employer-provided health insurance turns it down; among workers under 30 years of age, the refusal rate is almost one in three.
  • Millions of people are turning down (Medicaid) health insurance, even though it’s free! Millions of others are turning down their employers’ offers. Since employees pay about 27% of the cost of their health insurance, on the average, millions of workers are passing up the opportunity to buy health insurance for 27 cents on the dollar.
  • You almost never read statistics like these in the mainstream media. Why? Because they completely undermine health policy orthodoxy: the belief that health insurance (even Medicaid) is economically very valuable, that it improves health and saves lives, and that the main reason why people don’t have it is that they can’t afford it.

Welcome to the huge disconnect in health reform. On the one hand there are the people who are supposed to benefit from health reform. On the other hand there are the people who talk about it and write about it. I think it’s fair to say these two groups almost never meet.

Study after study has purported to have found that health insurance improves health, saves lives, makes people happier, etc., etc. But these studies almost always ignore two cardinal facts:

  • We have made it increasingly easy in this country for the uninsured to obtain health care after they get sick. We have also made it increasingly easy for people to get health insurance after they get sick. Both developments reduce the incentive to spend time and money enrolling in a health plan.

I have described before the experience of emergency room care in Dallas:

“At Parkland Memorial Hospital both uninsured and Medicaid patients enter the same emergency room door and see the same doctors. The hospital rooms are the same, the beds are the same and the care is the same. As a result, patients have no reason to fill out the lengthy forms and answer the intrusive questions that Medicaid enrollment so often requires. At Children’s Medical Center, next door to Parkland, a similar exercise takes place. Medicaid, CHIP and uninsured children all enter the same emergency room door; they all see the same doctors and receive the same care.

Interestingly, at both institutions, paid staffers make a heroic effort to enroll people in public programs ― working patient by patient, family by family right there in the emergency room. Yet they apparently fail more than half the time! After patients are admitted, staffers go from room to room, continuing with this bureaucratic exercise. But even among those in hospital beds, the failure-to-enroll rate is significant.

Clearly, Medicaid enrollment is important to hospital administrators. It determines how they get paid. Enrollment may also be important to different sets of taxpayers. It means federal taxpayers pay more and Dallas County taxpayers pay less. But aside from the administrative, accounting and financial issues, is there any social reason we should care?

Economics teaches that people reveal these preferences through their actions. If people act as though they are indifferent between being uninsured and being on Medicaid, we may infer ― based on this behavior ― they are equally well off in both states of the world from their own point of view.”

Against this conclusion, advocates of “behavioral economics” might argue that people don’t know what’s best for them. They have to be “nudged.” Seeing a football star on TV encouraging young men to enroll in a health plan might do the trick. But for the Obama administration that doesn’t solve the problem. People need more than an initial nudge. They have to be nudged every month.

Take Massachusetts. That state cut its uninsurance rate in half. But the main vehicle was Section 125 plans set up by employers. These accounts allow employees to pay their share of the premiums with pre-tax dollars and they are mandatory. Further, for lower-income employees the insurance is highly subsidized by the state. More to the point, under this arrangement, the employee’s contribution is automatically deducted every pay period.

  • Under ObamaCare, similarly situated individuals are going to be expected to pay a monthly premium the way they pay their utility bills. But with this difference. When people don’t pay their electricity bills, the utility cuts off their electricity. When they don’t play their rent, the landlord throws them out in the street. But when they don’t pay their health insurance premium, what happens then? Not much.
  • Why is it so important to the administration to have people enroll? If they don’t enroll in Medicaid, I don’t think it matters very much. But if they don’t enroll in private plans sold in health insurance exchanges, it will matter a great deal. Remember, these will be artificial markets in which insurance will be underpriced to the sick and overpriced to the healthy. A lengthy, complicated enrollment process will further discourage those with no health problems.
  • But if the only people who enroll are those who are sick, the average premium will go through the roof. A death spiral will ensue as ever increasing premiums price more and more buyers out of the market, leaving only those whose expected medical expenses exceed those high premiums.

The bright side of all this is a possible teaching moment. The whole nation may be treated to one vast demonstration of why prices matter.

*Modified from a Forbes article

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Obamacare Delay That Boosts Business Concerns Workers

While businesses hailed President Barack Obama’s decision to delay penalizing companies that fail to offer benefits under the health law, workers and states may struggle with the uncertain aftermath.

  • In postponing the mandate for a year, the president has lessened the need for employers to provide coverage or improve on skimpy benefits, and opened questions about who may be eligible for U.S. subsidies being offered in the online insurance exchanges now being created under the law.

For employers, “this is relieving, temporarily, a burden,” said Joseph Antos, a health economist at the nonprofit American Enterprise Institute in Washington. “The usual question is, well, who is harmed?”

The administration, in a blog post July 2, said it would release guidelines next week that it hoped would clarify enforcement of the Affordable Care Act rule going forward.

The delay was welcomed by economists, who saw uncertainty over the law as a drag on hiring.

“I see this as a reason to take a pretty big sigh of relief for the near-term economic outlook,” said Stephen Stanley, chief economist at Stamford, Connecticut-based Pierpont Securities LLC. “There were a lot of firms that probably were just not doing anything because they had no clarity on what labor costs were going to be next year.”

30 Hours

Under the provision, companies with 50 or more workers face a fine of as much as $3,000 per employee if they don’t offer affordable insurance. The rule covers those working 30 hours a week or more. Valerie Jarrett, a senior Obama adviser, said in a blog post announcing the move that the administration decided on the delay so officials could simplify reporting requirements.

While surveys suggested the mandate wasn’t deterring most businesses, the administration has faced a steady stream of reports about employers limiting hours or holding off on hiring. Employees at Darden Restaurants Inc (DRI)., owner of the Olive Garden and Red Lobster chains, who work fewer than 30 hours a week will be considered part time and won’t be offered insurance, Bob McAdam, the company’s senior vice president of government and community affairs, said in a phone interview. The company expects about 75 percent of its workforce to remain part time, he said.

The one-year postponement “could help boost payroll growth,” Maury Harris, a New York-based economist at UBS, said in a research note to clients. “For those employers on the cusp of the 50-employee threshold, this delay may prompt them to hire as they may be unwilling to continue to postpone hiring” to avoid offering benefits.

Payroll Growth

U.S. payrolls have been growing this year, with the economy adding 175,000 jobs in May and 149,000 in April, according to the Labor Department. The unemployment rate climbed 1/10th of a percentage point last month to 7.6 percent as more Americans entered the workforce. The government will report job growth for June on July 5.

Still, the delay may do little for hiring, said Amanda Austin, director of federal policy for the National Federation of Independent Business, a Washington trade group that calls itself “the voice of small business” in the U.S.

“Businesses like to plan for more than a year out,” she said in a telephone interview. “If they were looking at a plan to put in place for this, they will probably continue on with it. Just one year is not going to provide substantial relief.”

The downside could come for Americans lacking insurance coverage, said Rich Umbdenstock, president of the Chicago-based American Hospitals Association.

‘Shared Responsibility’

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

Without the penalties, the U.S. government may lose as much as $10 billion in revenue next year, the amount expected to be generated according to congressional estimates.

The White House suggested the impact of the decision would be limited. Ninety-eight percent of workers in firms with 50 or more employees worked for a company that offered health coverage to at least some of its employees in 2012, according to the Kaiser Family Foundation’s Employer Health Benefits Survey.

In March, meanwhile, a survey of large employers found 84 percent said they were unlikely to cut part-timers’ hours to avoid the mandate, according to Towers Watson & Co (TW)., the New York-based benefits adviser that conducted the research. Small employers were a different matter: An April poll by Gallup found 41 percent said they had backed off on hiring due to the law and 18 percent said they would have to cut workers’ hours.

Existing Requirements

Other requirements for businesses will remain in effect, said J.D. Piro, leader of the health-law group at benefits consultant Aon Hewitt, in a telephone interview.

Companies still must offer insurance to their workers’ children until age 26, and they must pay a minimum of 60 percent of medical bills and provide preventive health services, including birth control, without cost-sharing by employees, Piro said. Those provisions carry $100 daily fines per violation.

The delay “only applies to the employer mandate,” Piro said. “It doesn’t apply to any other part of the act.”

The individual mandate, a linchpin of the law that requires most Americans to carry health insurance, also remains in effect. So, too, will the online insurance exchanges, which are expected to sell subsidized health plans to some 7 million people next year.

More Difficult

While the Obama administration said the exchanges were on track to open for enrollment at the law’s Oct. 1 deadline, the delay promises to complicate their operations, said Kevin Counihan, executive director of the state of Connecticut’s exchange, in a telephone interview.

Government subsidies for uninsured people who buy coverage through the exchanges are supposed to be available only for those not offered affordable health insurance on the job. The markets will now have to figure out how to verify eligibility without employers reporting their benefits, Counihan said.

The government could demand subsidies back from consumers when they file tax returns in 2015, although that might produce a political “horror show,” he said.

Counihan said he was waiting to see what the administration proposes in follow-up regulations.

“There’s going to clearly be confusion about this,” he said. “There’s going to be a percentage of the population that also thinks that the whole thing has been delayed by a year.”

*Modified from an Insurancebroadcasting.com article

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ObamaCare employer mandate delayed until after 2014 midterms

The ObamaCare employer mandate requiring businesses to provide their workers with health insurance will be delayed by a year, the administration said Tuesday in a stunning announcement.

  • Delaying the requirement until 2015 is an enormous victory for businesses that had lobbied against the healthcare law. It also means that one of healthcare reform’s central requirements will be implemented after the 2014 midterm elections, when the GOP is likely to use the Affordable Care Act as a vehicle to attack vulnerable Democrats.
  • Many employers had threatened to cut employees’ hours to avoid the new requirements. Employers had also complained about the mandate’s reporting provision. Rules on the requirement came out this year, leaving little time for businesses to respond and prepare.

In a White House blog post, senior adviser Valerie Jarrett wrote that the administration believed it needed to give employers “more time to comply with the new rules.”

“This allows employers the time to test the new reporting systems and make any necessary adaptations to their health benefits while staying the course toward making health coverage more affordable and accessible for their workers,” Jarrett wrote Tuesday evening.

Jarrett also wrote that the delay would help in “cutting red tape and simplifying the reporting process.”

“We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination,” Jarrett said. “So we plan to re-vamp and simplify the reporting process.”

The Treasury Department’s announcement does not affect the individual mandate, which requires most taxpayers to either purchase insurance or pay a penalty, and administration officials said on Tuesday that other aspects of the law wouldn’t be delayed.

The law’s critics quickly framed that as a double standard, accusing the administration of acknowledging the law’s complexity for businesses without offering a similar break to the individual workers who still have to buy insurance. The employer mandate affected businesses with more than 50 workers.

“That the Obama administration is putting off this job-killing requirement on employers, but not individuals and families, shows how deeply flawed the president’s signature domestic policy achievement is,” said Sen. Orrin Hatch (Utah), the ranking Republican on the Senate Finance Committee.

“While a delay of this mandate is welcome news since it shows the challenges the employers are facing complying with it, a delay — conveniently past the 2014 election — only adds to the uncertainty these job creators face because of ObamaCare,” Hatch said.

Other Republicans seized on the news, arguing that the delays suggested the law was a “train wreck” and that Democratic candidates in 2014 would have difficulty explaining the delay.

Speaker John Boehner (R-Ohio) and House Majority Leader Eric Cantor (R-Va.) renewed their calls for repealing the law in full.

“This further confirms that even the proponents of ObamaCare know it will hurt jobs, decrease economic growth and make it harder for families to have access to quality and affordable health care,” Cantor said in statement.

“Rather than continuing to delay the predictable pain until another Election Day has passed, we should scrap this entire law and instead implement patient-centered reforms before any more damage is done,” he said.

Some Democrats had openly fretted about the law’s implementation.

While GOP leaders were quick to react, hammering the delay as evidence that the law is unworkable, Democratic leaders were quieter Tuesday evening. One exception was Democratic National Committee Chairwoman Debbie Wasserman Schultz (Fla.), who tweeted that the decision shows Obama is “in it for long haul to fully implement” the healthcare law.

Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid (D-Nev.) said the administration was showing “a willingness to be flexible.”

“It is better to do this right than fast,” said Jentleson in a statement.

Sen. Max Baucus (D-Mont.), one of the primary architects of the healthcare law, warned in April that small businesses were struggling to come to grips with their new responsibilities.

“Small businesses have no idea what to do, what to expect,” Baucus told Health and Human Services Secretary Kathleen Sebelius at a hearing.

“I just see a huge train wreck coming down,” Baucus said.

The U.S. Chamber of Commerce praised the delay.

“The administration has finally recognized the obvious: Employers need more time and clarification of the rules of the road before implementing the employer mandate,” said Randy Johnson, the Chamber’s senior vice president for labor, immigration, and employee benefits.

“The Chamber has testified numerous times about the problems with the mandate, and we applaud the administration’s step to delay this provision. We will continue to work to alleviate this and other problems with ObamaCare.”

“I hope that this means that employers who have been cutting employees to part-time will now call them back to full-time employment, but regret that the administration is delaying the implementation of an important provision of the ACA,” said Timothy Jost, a law professor at Washington and Lee University and a strong supporter of the healthcare law.

The change will likely mean that more people buy individual coverage through the law’s new insurance exchanges, which are supposed to be open for enrollment by Oct. 1.

If fewer employees have access to coverage through work, at least some are likely to turn to the exchanges for coverage and the tax credit that helps cover the cost.

Hatch said he hoped that was not the administration’s goal, stating it could be a “back door attempt at getting more Americans into the exchanges, which have been plagued by problems.”

More people on the exchanges would also mean greater federal spending on the tax subsidies, increasing the law’s total cost.

Sabrina Corlette, a health policy expert at Georgetown University, said the move could be a boon to consumers because plans on the exchanges will be stronger than those offered by many employers. She worried, however, that the employer mandate could be deferred again down the line.

“Anyone that’s been around politics long enough knows to be a little bit concerned,” Corlette said. “If a one-year delay is OK, how about a two-year delay? How about a three-year delay?”

The political effects of the delay could be more severe than the effect on the law’s expansion of healthcare coverage. One vulnerable Democrat, Sen. Mark Begich (Alaska), hailed the decision.

“I’m pleased the administration is listening to me and the many businesses that are concerned about the complexity of the new requirements,” said Begich, who is facing reelection in 2014.

In its most recent estimates before the delay was announced, the Congressional Budget Office said the number of people with employer-based coverage was not expected to change next year.

The penalty for employers that failed to offer coverage was also not expected to bring in any money next year, according to the CBO’s latest estimates.

The delay gives employers a free year to dump their workers into the law’s insurance exchanges, former Congressional Budget Office director Douglas Holtz-Eakin said.

“Essentially for calendar 2014, the act of dropping coverage and dumping employees into the exchanges is on sale,” he said. “Drop and dump, but no penalty.”

*Modified from a Hill.com article

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