No way out for employers on health benefits

When the Affordable Care Act was passed five years ago, many employers thought it would give them a way out of offering health benefits.

But they were sorely mistaken.

Last week’s Supreme Court ruling upholding the tax credits for Obamacare is just the latest in a string of developments that have kept employers from ditching their group health plans, as many predicted they would.

In fact, just the opposite has occurred.

A study by the RAND Corp. released last month found that employers accounted for the biggest single chunk of the growth in health insurance from September 2013 to February 2015—adding 9.6 million people to their health plans.

Obamacare’s expansion of Medicaid added 6.5 million during that time, while the Obamacare exchanges added 4.1 million.

“What the RAND study really shows is that employer-based benefits have been restored as jobs have started to come back,” wrote John Graham, a senior fellow at the conservative National Center for Policy Analysis, in a blog post.

Alternative views are that Obamacare’s employer mandate penalties pushed more companies to offer benefits and that Obamacare’s individual mandate “tax” pushed more individuals to join their employer’s health plan than before.

Now, the survival of Obamacare’s tax credits means employers are still on the hook to pay Obamacare’s employer mandate penalties if they don’t offer affordable, adequate health insurance to their full-time employees. That’s because those penalties against employers only get triggered if one of their workers bought insurance on an exchange and received a tax credit.

“Like a cat with nine lives, the Patient Protection and Affordable Care Act (ACA) has survived its second trip to the U.S. Supreme Court,” wrote benefits attorneys at the Ice Miller law firm in a June 25 summary of the Supreme Court’s decision. “As a result,” they added, “employers' ACA compliance efforts must continue.”

Many employers have complied by curtailing their part-time workers’ hours so they don’t trigger Obamacare’s definition of a full-time worker as one who averages 30 hours per week. This has occurred at retailers, such as Marsh Supermarkets and Scotty’s Brewhouse, to education institutions, such as public school districts and Ivy Tech Community College.

“In 2013, we were forced to reduce the hours of 25 instructional aides, 10 cafeteria workers and 10 custodians to less than 30 hours of service per week to avoid significant financial penalties,” said Dr. Rod Gardin, superintendent of East Porter County School Corporation near Valparaiso, Indiana, in a press release issued Thursday.

The East Porter County School district is one of 39 public school districts, along with the state of Indiana, that are suing the Obama administration, claiming the employer mandates in Obamacare cannot be legally applied to governmental entities. They claim the federal government has no authority to tax other governmental entities.

Other employers, such as the taxi-service Uber, have avoided providing health benefits by classifying their cab drivers as independent contractors. But a March ruling by the California Labor Commission said San Francisco-based Uber is really employing its drivers. That means, in California at least, Uber would have to limit workers to 29 hours per week to avoid Obamacare’s employer mandate.

“This mandate is a remnant of a 1950s economy where workers remained employed at the same firm for decades and the Internet was just a series of tubes that existed in our dreams,” wrote Northwestern University economists David Dranove and Craig Garthwaite on The Health Care Blog. “Ironically, the ACA insurance exchanges not only make the employer mandate obsolete, but the mandate actually weakens the viability of the exchanges by locking a large portion of the healthy population into the employer provided insurance market.”

And it’s not just the employer mandate that has kept employers from sending their workers to the exchanges.

When the Obamacare exchanges kicked off in 2013, many smaller employers thought they would be able to end their group health plans and instead help their employees pay for health insurance on the Obamacare exchanges. That’s still possible, but none of the employers’ “help” can be in pre-tax dollars, according to a final rule issued by the Obama administration in May 2014.

That ruling has greatly slowed the rate at which employers have ended their group plans, noted Matt Kleymeyer, a health benefits consultant at the Indianapolis office of Tennessee-based Bernard Health.

“It’s a lot slower than what we had thought,” he said.