Per­ils ahead

Em­ploy­ers cheer man­date’s de­lay, but move leaves ACA open to new at­tacks

Modern Healthcare - - COVER STORY - Jonathan Block and Rich Daly

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 full­time 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 em­ploy­er­pro­vided 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 home­care 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 onethird 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.”

GETTY IM­AGES

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 it could be a good move if it leads to sim­pler and bet­ter rules for em­ployer cov­er­age.

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