SAN DIEGO — The federal health care overhaul will make a bigger impact through insurance premium subsidies that change management and labor behavior than it will through its provisions for universal access, a former Senate finance committee advisor told United Fresh 2013 attendees.
Christopher Condeluci, an attorney with Baltimore-based Venable LLP, was tax counsel to Republicans on that committee for nine months in 2009. Much of the Affordable Care Act — or “Obamacare” — was drafted then by the committee.
As employees and employers make and revise their calculations on premium subsidies and tax penalties, the results could stand conventional wisdom on its head, Condeluci told a May 16 session of the United Fresh Grower-Shipper Board. For example, there could be scenarios where offering coverage hurts rather than helps retention of employees.
“Your employee may come to you and say, ‘Because you’re offering me this plan, I can’t go to the exchange and get the subsidy,’” the attorney said. “He might say, ‘Drop coverage or I’m just going to quit and go somewhere else where they don’t offer it.’”
“As an employer I might say ‘Sure,’ because I can save dollars and I know people are getting covered by quality insurance.”
“Subsidies are the most important part of this law,” he said. “No pre-existing condition, accessibility and the closing of the doughnut hole — those are all helpful. But they are not going to affect behavior to the degree that premium subsidies will.”
It’s been too little reported, Condeluci said, that individuals offered a qualifying employer health plan won’t be eligible for a subsidy when insurance exchanges open in October or January. They’ll be unhappy they’re not getting it, and maybe for good reason. It all depends on their income, household situation and what coverage their employer offers.
Less reasonable behavior is possible too. Employees could misrepresent employers’ plans to the exchanges in order to claim the subsidy. Condeluci forecasts “administrative action back and forth” between exchanges and employers on such issues.
There are two ways for companies with 50 or more full-time employees — which represent the majority of United Fresh attendees — to run afoul of the law’s employer mandate and face penalties:
- By not offering coverage. That penalty is $2,000 multiplied by the number of employees. Since that’s nondeductible, he said, the real value is higher — closer to $3,000.
- By offering coverage that falls below the law’s minimum standards. That penalty is $3,000, but only for each employee who gets a subsidy. Coverage is substandard when its cost exceeds 9.5% of household income or fails to cover at least 60% of medical claims.
It won’t always be obvious who must be offered coverage, Condeluci said, since not everyone works 30-plus hours weekly through the year. The law’s provision for a measurement period during which coverage need not be offered is an asset for businesses with seasonal or variable-hour employees. He recommended the maximum allowed — 12 months.
“Seasonal has not yet been defined,” Condeluci said. “Regulators have hinted that they’re likely to define it as someone who works less than six months. That’s a good thing for you. If you have someone who’s working more than 120 calendar days, which is the typical definition of seasonal, but less than six months, you can throw them into the measurement period and not offer them coverage.”
Variable-hour employees are more permanent but can also be placed in a measurement period.
For businesses with fewer than 50 full-timers, the choice can be simpler.
“If you’re not subject to the penalties and you have a low-income work force, it’s almost a no-brainer to drop coverage and send your employees to the exchange,” Condeluci said. “They’re probably better off because they’re getting subsidized, and you’re not paying for coverage. That’s what a lot of small employers are thinking.”
For larger companies subject to the mandate, the calculation may vary from year to year.
“Over time the penalty might equal the amount you’re paying for health insurance,” Condeluci said. “So if you drop coverage at some point, you might be offering it again. Or maybe health coverage costs continue to increase to such a great degree that it’s unsustainable and therefore you drop coverage and pay the penalty. These are the thought processes people are going through.”