Delay Of Obamacare’s Employer Mandate Exacerbates An Already Bad Situation

Last month, the Obama Administration proclaimed itself a friend of American business by announcing a one-year delay, until 2015, of the “employer mandate” — the provision of its signature health reform law that requires businesses with 50 or more full-time employees to provide health insurance.

“We have listened to your feedback,” Treasury official Mark Mazur said on July 2. “And we are taking action.”

But in the weeks since, it’s become increasingly clear that the delay will provide little practical relief for businesses. Obamacare will still force them to pay more for health coverage. The delay simply gives them one more year to react — by cutting benefits, trimming hours, or reducing staff.

At the end of July, the National Federation of Independent Business (NFIB) told a congressional panel that the employer mandate delay only “exacerbates questions” about the administration’s “ability to implement and administer (Obamacare) in any type of cost-effective and fair manner.”

Small businesses “continue to be in an economic holding pattern,” noted William Dennis, the director of NFIB’s research foundation.

According to a recent Chamber of Commerce survey, 71 percent of small businesses say that Obamacare will make it harder to grow their businesses. Half say that they’ll either cut hours or shift to part-time workers to dodge the additional costs the employer mandate will bring.

Government employment data are starting to reflect these survey results. The average workweek for nonsupervisory retail workers dropped to 30.1 hours in June. That’s more than a half-hour less than just six months prior, according to the Bureau of Labor Statistics.

What’s worse, the nation’s most vulnerable workers will bear the brunt of the mandate’s ill effects, since they’re most likely to hold the kind of jobs companies are cutting.

The law actually gives businesses a powerful incentive to avoid hiring low-income workers in the first place. A company faces a penalty of $3,000 for every worker who gets subsidized health insurance in Obamacare’s exchanges. But the subsidies are only available to lower-income families.

Why does that matter? As James Capretta, a Senior Fellow at the Ethics and Public Policy Center, explained in testimony before Congress on July 10, “a small restaurant chain might find it more attractive to hire a low wage service worker who happens to live in a middle class neighborhood than to hire someone from a lower income area who might be eligible for the health law’s premium subsidies.”

The White Castle hamburger chain told lawmakers that “it is the mounting uncertainty surrounding the health care law that has brought us to a standstill.” In the years before Obamacare, White Castle had been opening an average eight new restaurants a year. But in the past two it’s had no net growth.

White Castle vice president Jamie Richardson also said that, delay or not, the company is considering only hiring part-time workers in the future, because it expects Obamacare will boost its insurance costs by some 35 percent.

The high-end Wegman’s grocery store chain revealed in July that it would drop health benefits for its part-time workers. The company had previously extended health coverage to workers who put in as few as 20 hours a week. Next year, those employees will have to buy insurance on their own in one of Obamacare’s government-run exchanges.

So much for Obama’s oft-repeated promise that everyone who liked their coverage would get to keep it under his health reform law.

CKE Restaurants — which owns Carl’s Jr. and Hardee’s, among others — already offers health insurance to its workers, without the mandate’s prompting. But according to CKE’s CEO, Andrew Puzder, only 6 percent of crew-level employees — and just 60 percent of managers — enroll in the company’s health plan.

They’re not likely to take up coverage when the employer mandate kicks in, either, as their share of premiums will be greater than it is now — and several times higher than Obamacare’s penalty for going without coverage.

They’ll simply wait to get coverage until they get sick. That will drive down the insured rate. And because they won’t be paying into the insurance pool, costs will go up for everyone else.

Businesses also face some $30 billion in new expenses associated with complying with Obamacare, according to the American Action Forum. Those costs won’t go away just because the mandate has been delayed.

Indeed, the administration’s excuse for delaying the mandate — that the reporting requirements were too complicated for businesses to figure out by 2014 — is itself evidence of how ridiculously burdensome the law will be.

Nor has the delay done anything to mollify Obamacare’s erstwhile allies in organized labor. Union groups are growing increasingly agitated about the harm Obamacare will do to their members.

Two weeks after the administration announced the delay, the presidents of three of the country’s biggest unions told the Democratic leaders of the House and Senate that the law “will shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class.”

The delay also has implications for the federal government’s finances. Last week, the Congressional Budget Office announced that the delay will deprive the feds of $12 billion in lost tax revenue and other costs over the next decade.

In the end, the employer mandate delay is worse than pointless. The only way to relieve the harm Obamacare is causing businesses and workers is to eliminate it altogether.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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