1. Affordable Care Act
Employer Mandate

2. What is the employer mandate?
As of 2016 all companies with more than 50 employees will have to offer insurance to 95% of their full time employees or face a penalty.

3. Why is this Important?
Most of our generation will be covered under parental insurance until 26
Afterwards, the vast majority will receive coverage via an employer
Directly impacts the most common way we will receive insurance

4. No Easy Task

5. How It Works
Note: approximately 96% of employers are small businesses with less than 50 full-time employees
Employer Mandate Fact Sheet. (2014, December). Cigna.
Note: Spouses do not count as independents (up to discretion of employer whether or not plan covers them)
-Those who work at least 30 hours per week, or whose hours total at least 130 a month, for more than 120 days in a year are considered full-time employees.
-Important to note that only employees working in the U.S. count. Employers are not required to take into account employees working overseas.

6. Key terms
Minimum Value- must pay at least 60% of the cost of coverage services
Affordable- employees pay no more than 9.5% of their household income for coverage
FTE- work at least 30 hours per week or 130 hours a month for more than 120 days in a year

7. Employer Penalties
Employer Mandate Fact Sheet. (2014, December). Cigna.
-Penalty known as an Employer shared Responsibility Payment
-A ”minimum value” plan means that it must pay at least 60% of the cost of covered services. This is taking into account deductibles, copays, and coinsurance.
-Coverage is constituted as “affordable” if it totals no more than 9.5% of the employee’s household income.
-The Department of Health and Human Services has developed a minimum value calculator that all insurance plans are run through in order to determine whether or not an employer is to be charged a penalty.
-The fee is a per-month fee, so per-month it is 1/12 of the total penalty

8. Example of Penalty
Say an employer has 500 full-time employees and decides to offer no coverage. The penalty would be equal to:
# employees - first 30 employees = # of penalized employees
(# of penalized employees) × (penalty) = total penalty fee
-The penalty is only triggered when at least 1 employee, who is eligible for a federal premium subsidy, purchases coverage on the marketplace.
-Companies are not charged a penalty for the first 30 employees that are not offered coverage.
-Note that the 30 employee deductible is based on the 2016 start date. Any companies qualifying for the 2015 start date can exclude the first 80 employees not covered.

9. Example of Penalty
Say an employer has 500 full-time employees and decides to offer no coverage. The penalty would be equal to:
# employees - first 30 employees = # of penalized employees
= 470 employees
(# of penalized employees) × (penalty) = total penalty fee
470 x $2,000 = $940,000 penalty
-The penalty is only triggered when at least 1 employee, who is eligible for a federal premium subsidy, purchases coverage on the marketplace.
-Companies are not charged a penalty for the first 30 employees that are not offered coverage.
-Note that the 30 employee deductible is based on the 2016 start date. Any companies qualifying for the 2015 start date can exclude the first 80 employees not covered.

10. Different Penalty Calculations
Say an employer has 1,200 full-time employees. They offer coverage, however, it does not meet the minimum value requirement:
(1, ) x $2,000 = $2,340,000 penalty
250 x $3,000 = $750,000 penalty
-In this example, there are two ways to calculate the penalty a company must pay. In the end, they pay the lesser of the two penalties.
-The first way is calculated the same as an employer who offers no coverage.
-The second way is based on how many employees are eligible for a subsidy when buying insurance on the marketplace. In this example, b is the penalty to employer must pay.

11. Potential Effects Drop coverage and pay the penalty fee
Companies could reduce the number of FTEs
Provide Coverage for all FTEs

12. Drop Coverage The mandate would encourage dropping coverage altogether
With ACA’s new tax subsidies, employers can pay $2,000 fine and offer employees higher wages

13. Cost of Coverage
Based on the penalty fee, it would seem likely that firm’s would reduce their number of FTEs to avoid the penalty or pay the fine as both are cheaper options than providing health insurance coverage.

14. Cost of Coverage
Average Annual Cost for Employer = $4,885 per employee
Average Annual Cost for Employee = $999
Even with the lowest employer contribution for covered workers ($4,419) the cost of coverage still greatly outweighs the $2,000 penalty
Based on the penalty fee, it would seem likely that firm’s would reduce their number of FTEs to avoid the penalty or pay the fine as both are cheaper options than providing health insurance coverage.

15. Dropping Coverage Example
Federal minimum wage = $7.25/hour
Annual income for minimum wage FTE worker= $15,080
Estimated subsidy = $2,288 per year
Premium Cost for Single Worker = $303 per year
Employer could drop coverage and increase employee’s wages by $1,000

16. Dropping Coverage Example
New subsidy= $2,061
New Cost of Coverage for Employee= $531 per year
Employer saves $1,885 ($4,885-$2,000-$1,000)
Employee gains $772 after paying for the increased coverage cost ($1,000-$228)

17. Impact of Dropping Coverage
Undervalues employees, leading them to seek better employment opportunities elsewhere, resulting in high employee turnover
High employee turnover will force firms to spend time and resources filling and training new employees
Though dropping coverage appears beneficial for employers and employees who qualify for subsidies, in the long run it may be more costly and damaging to a firm.

18. Impact of Dropping Coverage
The cost of hiring and training new employees can be about 30% of the positions annual salary, so even replacing minimum wage employees can cost as much as $4,524 ( roughly the cost of coverage)
New employees also lack experience and could be damaging to a firm’s efficiency and reputation

19. Effects on Labor Markets
Source:
make sure to go into greater explanation of this figure and include source on slide

20. Small v. Large Firms Economic Intuition
Effects on very small firms and very large firms is to a lesser extent
Greatest effects are for firms on and around the cutoff of 50 employees
Why?
While “tax” for mandate is proportional for all firms, the percentage of total cost for larger firms is smaller
Larger firms can negotiate insurance more effectively
Sticky Wages
CBO estimates total hours worked will decrease 1.5-2% during period

21. Reducing FTE’s Produces similar outcomes as dropping coverage:
Leads to employee dissatisfaction and high employee turnover
Damages the firm’s efficiency and reputation

22. Save American Workers Act
FTE status would be raised from 30 to 40 hours a week
Implications include:
Fewer full-time workers receiving mandatory coverage
Deter employers from cutting jobs and/or hours
Adverse effect: employers more likely to cut hours from 40 to 38 than they are from 40 to 27
(“Save American Workers Act Facts,” n.d.)
-Bill to amend to Affordable Care Act
-First proposed in June of It was struck down when it tried to pass as the Save American Workers Act of It has been proposed as the Save American Workers Act of It passed in the house is January, however, it is not expected to pass the President’s desk. The reasoning behind this would this adverse effect.
-The Obama Administration argues that at 30 hours, a business has to make a very hard choice between a part-time workforce and providing benefits.

23. Impact on U.S. Workforce (Glied and Solis-Roman, n.d.)
-Study published in the Commonwealth Fund in October of 2014
-This graph shows the number of hours worked by full-year employed workers of large firms.
-About 5.22% of such workers work fewer than 30 hours per week. Also, only 2.59% have hour work week schedules. The implication of this is that there is a very small percentage of workers who are in jeopardy of getting laid off or having their hours cut.
-As you can see, there is a spike in the number of workers who work around 40 hour work weeks. To be exact, the number jumps from 2.9 million to 28.6 million.
-Statistics also prove that more than half of the 2.59% already receive employer-sponsored insurance through their own employers.
-In total, about 835,000 workers (about .75% of all U.S. workers) currently work hours near the mandate threshold and are not offered health insurance coverage.
-Bringing us back to Save American Workers Act, raising the threshold to 40 hours per week would put a lot more employees jobs in jeopardy, like the Obama Administration said, in both the short-run and the long-run.

24. Impact on U.S. Workforce
More than half of the 2.59% of workers at the mandate threshold already receive employer-sponsored insurance
In total, only 0.75% of all workers at the mandate threshold are not offered health insurance coverage
(Glied and Solis-Roman, n.d.)

25. Hawaii Employer Mandate
Hawaii Prepaid Health Care Act
State Law Enacted in 1974
Requires the employers to offer coverage to employees working at least 20 hours/week
Federal reserve banks

26. Hawaii vs. ACA All Employers
Coverages for employees working over 20 hours/week
Employers with over 50 employees
Coverages for employees working over 30 hours/week or 120 days a year
Only workers with a very low probability (26%) of holding employer-sponsored insurance before the mandate were more likely to have low hours. No effect was observed among workers with higher initial rates of employer coverage. The Hawaii results suggest that the ACA mandate would have very little effect, if any, because it affects only the workforce of larger firms, where the probability that workers already hold coverage is more than double the Hawaii figure (58%)
consistent with the standard supply/demand theory regarding the effects of employer mandates

27. Hawaii Employer Mandate
Employer Sponsored Insurance coverage rose
No significant changes in employment probabilities or wage
But…
Wage reductions are constrained by the minimum wage
Only workers with low income were affected.
Increasing %working less than 20 hours
Shift the coverage burden from public programs to the private sector

28. Source: Urban Institute, Blumburg & etc., May 2014
Lots of opposition to this provision due to the disruption to labor market
Urban Institute
Source: Urban Institute, Blumburg & etc., May 2014

29. Impact on Insurance Coverage
Source: Urban Institute analysis, Health Insurance Policy Simulation Model 2014.
Note: The ACA is simulated as if fully implemented in 2016.

30. Coverage without Mandate
Tax benefit–Insurance contributions are nontaxable
Reduced Premium rate–Natural risk pooling
Firm with low-wage workers less likely to offer coverage due to subsidies (Premium Tax Credit), and expanded Medicaid regardless of penalty
Small business not affected by this provision
Reasons for employers to offer insurance coverage without the mandate or penalty
Thus simply because penalties are eliminated, it doesn’t mean many employers will drop the coverage

31. Concluding Ideas
Only 0.75% of all U.S. workers currently work hours near the mandate threshold and are not offered health insurance coverage
Most large firms and firms under 50 workers are not affected (96% firms are under 50 employees)
Little increases in expanding coverage
Creates inefficiencies and deadweight loss
Long-term effects yet to be determined

32. Questions

33. Works Cited
Blumberg, L. J., Holahan, J., & Buettgens, M. (2014). Why Not Just Eliminate the Employer Mandate? Urban Institute.
Buchmueller, T. C., DiNardo, J., & Valletta, R. G. (2011). The Effect of an Employer Health Insurance Mandate on Health Insurance Coverage and the Demand for Labor: Evidence from Hawaii. American Economic Journal: Economic Policy, 3(4), 25–51.
Employer Mandate Fact Sheet. (2014, December). Cigna.
Final Regulations Implementing Employer Shared Responsibility Under the Affordable Care Act (ACA) for (n.d.). U.S. Treasury Department.
Glied, S., & Solis-Roman, C. (n.d.). What Will Be the Impact of the Employer Mandate on the U.S. Workforce. The CommonWealth Fund.
Obamacare’s Employer Mandate Didn’t Help Company Enrollment. (n.d.). Retrieved April 20, 2015, from
Penalties for Employers Not Offering Coverage Under the Affordable Care Act During 2015 and (2014, December 17). The Henry J. Kaiser Family Foundation.
Save American Workers Act Facts. (n.d.). Retrieved April 21, 2015, from
Why Employers Will Continue to Provide Health Insurance: The Impact of the Affordable Care Act, Blumberg, Buettgens, Feder, Holahan 2012)