A guide to the employer mandate

ObamaCare’s employer mandate has been a controversial part of the healthcare law since its introduction.

Businesses had pushed for its delay, and the Obama administration ceded to those demands Tuesday in announcing it would not be implemented until 2015. 

{mosads}The administration said the delay was designed to give businesses more time to figure out their healthcare plans and record keeping requirements, while critics see it as a tacit admission that the law is deeply flawed.

Here’s a quick guide to how the employer mandate is supposed to work:

Who has to comply?

The mandate applies to all employers with more than 50 full-time employees. That includes private businesses as well as large institutional employers like state governments and school districts. Any employer with 50 or more full-time workers has to either provide coverage or pay a penalty.

Employers can also be penalized even if they offer health insurance, if the insurance is not considered affordable and some of their workers end up getting financial help from the federal government to buy insurance on their own.

For the purposes of the employer mandate, a full-time worker is anyone who works 30 or more hours per week. That’s been one of the business lobby’s big gripes about the requirement — they say the cutoff should be 40 hours, the traditional definition of a full-time worker. But good luck getting congressional Republicans to change a definition in ObamaCare to make it work more smoothly.

What are the penalties?

This is where things get more complicated. Let’s start with employers that don’t offer health insurance to their full-time workers: If one or more employees receives a tax subsidy from the federal government to help buy insurance on their own, fines are triggered. The penalty in this case is $2,000 per employee.

However, the mandate carves out the first 30 employees. So if a business has exactly 50 employees, and it doesn’t provide health insurance, it would only have to pay the penalty for 20 of its employees, according to the National Federation of Independent Business. That would come to $40,000.

That gives employers a fair amount of wiggle room to skip out on offering insurance for up to 30 of their full-time workers.

There’s a separate penalty for employers that do offer coverage, but still have at least one employee who gets a tax subsidy from the federal government. 

In that case, the employer would pay either the base $2,000 fine described above, or a $3,000 fine for each employee who receives a tax subsidy — whichever is lower. So, a business with 50 employees, only one of whom is subsidized, would only have to pay $3,000. 

The government still fines the employer to help cover the costs of providing tax credits for that one worker’s coverage, but since the employer is at least trying to offer health insurance, the penalty isn’t as bad.

What kind of insurance do employers have to provide?

Employers don’t just have to offer coverage to escape the mandate’s penalties — they have to offer affordable coverage. A healthcare plan is considered affordable under ObamaCare if the employee’s share of the cost is lower than 9.5 percent of his or her income. If employees have to buy a plan that costs more than that, they can apply for tax subsidies, and the employer is then at risk for having to pay penalties.

Employer-based plans also have to cover an average of 60 percent of healthcare costs — in other words, they can’t be plans with low premiums that won’t actually cover any healthcare needs.

Which employees can get subsidies?

Since the employer mandate is tied to employees who get tax subsidies, it’s important to know who is eligible for those subsidies. The short answer: people with incomes between 100 percent and 400 percent of the federal poverty line. For a family of four in 2013, according to NFIB, that would be a total household income of between $23,550 and $94,200.

Isn’t it cheaper to pay the penalty than to provide healthcare?

Yes. But remember, pre-ObamaCare, there was no penalty whatsoever for failing to provide healthcare, and yet the vast majority of businesses still do it. Companies started offering healthcare benefits to attract the best workers, and it has become the dominant source of health insurance in the U.S. even without a mandate requiring them to do it.

Is this mandate a big part of ObamaCare overall?

Sort of. It’s certainly a big political part of the law — it’s one of the provisions Republicans have criticized most. And it was set to have one of the most visible unintended consequences, as employers began cutting workers’ hours to avoid the mandate — thereby hurting the very people it was intended to help.

But the mandate isn’t a big factor in the law’s expansion of health coverage, and the penalty isn’t a big source of revenue. In fact, in its latest projections, the Congressional Budget Office estimated that in 2014, the number of Americans with employer-based coverage would not change and the mandate penalty would not raise any significant revenue for the federal government.

Over the next decade, the payments were expected to total roughly $140 billion, while the number of people with employer-based insurance fell by about 7 million.