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For N.J. employers already planning for health reform's impact, Obama's about-face comes as a shock

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Barack Obama has suspended certain penalties of the Affordable Care Act until 2015.
Barack Obama has suspended certain penalties of the Affordable Care Act until 2015. - (NJBIZ file)

The Barack Obama administration's suspension for one year, until 2015, the penalties imposed by the Affordable Care Act on employers with more than 50 workers who don't offer health insurance to full-timers is causing both relief and confusion for employers.

Employers already have been making important business decisions — like not hiring their 50th employee or limiting worker hours below the 30-a-week threshold — in addition to investing huge amounts of time and money on lawyers, accountants, consultants and insurance brokers to help them comply with the ACA.

And since the law's individual mandate remains in effect, requiring most Americans to have coverage in 2014 or pay a penalty, employers will remain under pressure to provide coverage to employees, who instead will shop for their own coverage on the ACA's new exchange marketplaces, where lower-wage workers will get federal subsidies to help make coverage more affordable.

Insurance broker Vaughan M. Reale, vice president of CBIZ/ABP said employers already have devoted "many, many man-hours of analytics and planning. They have wasted so much productive time that could be focused on their core business."

He said he recently met for more than two hours with a physician practice considering dropping health coverage for its 70 employees, and letting them buy coverage on the exchange. "I told them it's premature to make that decision … we're getting updates and changes daily." He said by the end of the meeting, the physicians had decided to continue to offer coverage.

That wasn't the case for everyone.

Thomas Connery, chief operating officer for New England Motor Freight, an Elizabeth-based trucking company that already enacted changes to employee hours in advance of the mandate, was surprised by Tuesday's announcement.

NEMF capped hours at 29 a week, effective June 1, for about 400 part-time employees who previously worked more than 30 hours a week. Connery said the company is checking with its health care consultants to get full details of the change.

If the mandate still applies to employees working at least 30 hours, Connery said the delay won't change policy, though the company may have waited longer to adjust hours.

"It doesn't change anything, in terms of the mandate," Connery said. "You can rest assured we will be below 30 hours for those employees. We're not going to give them insurance. We simply can't afford to go down the road."

Employers face a dilemma, said Mike Thompson, the New York metro health care practice leader for PricewaterhouseCoopers Human Resource Services.

Large employers won't have to pay the $2,000 per full-time workers penalty — minus the first 30 full-timers — in 2014 if they don't offer insurance. However, if they don't offer coverage, their employees may go to the exchange and get a subsidy. Then, if the employer offers coverage in 2015, the employees will no longer be eligible for subsidized coverage on the exchange — even if the employer plan turns out to be more expensive than the exchange.

That's why employers already working on providing coverage in 2014 will stay the course, Thompson said — "and there could be some bad will (from their employees) for employers who don't move forward."

But attorney James Anelli, of LeClairRyan, said some of his client companies "are in the middle of collective bargaining over issues" involving the ACA.

Some employers "were basically structuring their workforces in terms of the size and the number of hours worked based upon the ACA," he said. At this point, "a lot of employers will have to step back and say, 'Should we just continue to do what we are already 90 percent done with, or do we just stop everything in place and wait and see?' "

Right now, the individual marketplace is still on track for the 2014 rollout, and Mike Munoz, senior vice president of sales and marketing for AmeriHealth New Jersey, doesn't expect that to change.

"We don't expect the delay to impact the individual marketplace because the exchanges will be operational and the individual mandate and subsidies will still be in place," Munoz said. Additionally, he said, AmeriHealth is seeing interest from employers to begin offering coverage to their workers after being on the sidelines.

AmeriHealth will offer coverage on the new ACA exchange, which on Oct. 1 is set to begin selling policies that take effect Jan. 1.

John Sarno, president of the Employers Association of New Jersey, said of his more than 1,000 members, almost all offer health insurance and are in compliance with the ACA, but he expects the penalty could go away altogether.

He said the delay in the penalties will allow national employers — like restaurant chains and retailers with a lot of uninsured workers — to move their employees to the exchange without being subject to penalties. And in 2015, when the penalties are supposed to return, the Obama administration could then let the larger employers off the hook, Sarno said.

Once their employees are covered on the exchange, he said, "the large employers could then say, 'What's the point of penalizing us now?'"

Contributing: Tom Zanki

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Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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