Amending The Employer Mandate

By: Maya Kushner

With the Supreme Court’s decisions on the Defense of Marriage Act (DOMA) and California’s Proposition 8 and the Abortion Bill fight going on in Texas, there are plenty of polarizing issues being debated nationally. It would seem that the Patient Protection and Affordable Care Act, or Obamacare – such a hot topic in 2010 – has been all but forgotten. However, on July 2nd, the White House unexpectedly announced that the so-called Employer Mandate section of Obamacare will be delayed by one year, until 2015

Section 1513 of Obamacare was enacted March 23, 2010 and became Section 4980H of the Internal Revenue Code. This section mandates that applicable large employers, which generally means employers with 50 or more full-time employees provide affordable and “minimum essential [health care] coverage” to their full-time employees.

The White House explained the announcement by saying that they listened to business’ concerns that there was a relatively short amount of time left to conform to the bill. However, some Republicans said the announcement was proof that even the Democrats now see that Obamacare was a bad idea and should be scrapped altogether.

Just days before the White House announcement, on June 28th, Representative Todd Young (R-IN) introduced the Save American Workers Act (H.R. 2575). The bill seeks to amend Section 4980H, specifically part (c)(4). Part (c)(4) defines “full-time employee” for the purposes of the Employer Mandate as an employee that works 30 hours a week; the House bill seeks to amend the section to redefine a full-time employee as one that works 40 hours a week instead. The Save American Workers Act has 120 co-sponsors. The bill also has strong support in the business community: the same day it was introduced in the House, it was applauded by the U.S. Chamber of Commerce – the world’s largest independent business membership organization. The Chamber often supports right-leaning policies.

While the bill is only in its beginning stages to becoming law – it was just assigned to a committee – there is a high probability that it will approved by the Republican-dominated House. However, it is unlikely to pass the Democrat-dominated Senate, and on the off chance that it does, will likely be vetoed by the White House.

The Employer Mandate’s definition of a full-time employee is new in U.S. law. Most people are familiar with the Fair Labor Standards Act of 1938 – it’s what set a maximum work week at 40 hours, and required that overtime is paid at “time and a half” past those 40 hours worked. For decades, being a full-time employee has traditionally meant working 40 hours a week. However, this was only by custom as the Act itself does not define what a “full-time” and “part-time” employee is and there is no national definition of a “full-time employee. Rather, a full-time employee is defined differently for various purposes (healthcare, income tax, etc.).

Until Obamacare was enacted, providing healthcare benefits to employees was optional (except in Hawaii and Massachusetts). However, many business, especially large ones, provide health care benefits to their full-time employees (some, like Starbucks, provide health care benefits even to their part-time employees). Indeed, employer provided health insurance has become one of the benefits that employees are accustomed to expect. But if a business offering health care benefits to full-time employees wanted to limit its expenditures in that department, it would simply cut its employees’ hours to 39 hours per week or less (perhaps it would also hire more part-time employees, to keep the total working hours the same). With the enactment of Obamacare, many businesses, especially smaller ones, were planning to do just that: restrict their employees to 39 hours per week in order to avoid the Employer Mandate.

But with the Employer Mandate defining a full-time employee as working 30 hours a week, employers will have to cut their employees’ hours to 29 or less per week if they still want to avoid the mandate. This is a drastic change, and the savings realized from not providing health insurance may well be overshadowed by additional costs, such as training new-part time employees that will undoubtedly have to be hired to keep the business productivity at the same level. If the hours of full-time employees are in fact cut to 29 or less per week, it will have a great impact on the workers themselves as well. Someone who may have been able to lead a normal life, or at least get by on a paycheck for 39 hours a week, may now have to seek a second or maybe even a third job to make ends meet. This will also have an impact on the worker’s quality of life: consider the stress and time commitment of the commute between jobs, the juggling of schedules, and other problems that arise when trying to maintain two or more jobs at the same time.

Supporters of the Employer Mandate hope that it will help healthcare be more accessible and more affordable to more workers (the government’s most recent survey estimates that 15.7% of the population is uninsured). However, proponents of H.R. 2575 argue that the Mandate is not the proper way to achieve that goal. In fact, they argue, the Employer Mandate will have the unintended consequence of many workers seeing their hours reduced and their paycheck cut.

Undoubtedly most new laws have some unintended negative consequences, and that is not necessarily a reason in itself to scrap the law. And the health care of uninsured Americans is a big problem and one that should be addressed by the government. However, beyond the potential negative impact on workers, the 30-hour definition of a full-time employee in the Employer Mandate seems arbitrary. It is inconsistent with the rest of employment law that defines a full-time employee as working 40 hours, and introducing this definition for only one purpose complicates employment law, taking a unified system and making it piece-meal. A consistent approach will make employment law easier for workers to navigate, easier for businesses to implement, and easier for the government to enforce.

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