Members of the House Ways and Means Committee Subcommittee on Health and witnesses spent more than two hours Tuesday debating the value of the employer mandate and the potential impact of its delay, at times testily.
The Obama administration continues to face the ire of Congress as questions about implications of the delay in the enforcement of the employer mandate have opened the door, for the 38th time, for the House to push for the complete repeal of the Patient Protection and Affordable Care Act.
In the first of what is expected to be several congressional hearings on the subject, the House Ways and Means Committee Subcommittee on Health met Wednesday to hear testimony about the anticipated impact of the delay from members of the business and healthcare policy communities.
The Obama administration unexpectedly announced last week that it would delay for one year a key provision of the PPACA which requires mid-sized and large employers to provide health insurance for their workers or pay a fine.
See Also: CMS Releases Proposed OPPS, Physician Fee Rules
In his opening statement, Rep. Kevin Brady (R-TX), the subcommittee chair, quickly transitioned from what he termed the Treasury Department's "strangely-timed announcement… on an obscure Treasury blog site just two days before the 4th of July" to his support for the postponement of the individual mandate, and finally to a call for full repeal of PPACA.
Brady provided a grocery list of "delays and failures" of healthcare reform. "The CLASS Act proved unworkable and was abandoned. The onerous 1099 reporting mandate was overwhelmingly repealed. The exchanges promised for small businesses failed to be ready on time and were delayed. Significant parts of the law were found unconstitutional, 34 states have chosen not to build state exchanges, the technology-intensive data hub key to ObamaCare isn't ready, [and] the Navigator grants have not gone out to local communities. The list is growing, not shrinking as we get closer to October 1," which is the date for the implementation of the cornerstone of PPACA—the health insurance marketplaces.
Jim McDermott, (D-WA), the ranking committee member, reminded that committee that it is "our job to continue to shape and guide reform so that it best serves the American people… to focus on policy not politics. There's been a lot of noise from both sides of the aisle… but no one really knows what this shift means."
In a sharp rebuke, McDermott noted that "the irony of objecting to the delay of a program you have been trying to stop is no doubt lost on this room." That was a reference to HR 903, which would repeal provisions of PPACA that require employers with more than 50 full-time employees to provide health insurance coverage.
The five witnesses presented testimony and answer questions from the committee: Avik Roy, senior fellow at the Manhattan Institute, a think tank; James Capretta, fellow at the Ethics and Public Policy Center in Washington, DC; William Dennis, Jr., senior research fellow at the National Federation of Independent Business; Sean Falk, a business owner representing the International Franchise Association; and Timothy Jost, a professor at Washington and Lee University School of Law.
In a session that at times was testy, the witnesses and the committee members spent more than two hours debating the value of the employer mandate, focusing on the familiar themes that clearly resonated with many of the committee members: harm to low income workers, the negative effect on job growth, and the definition of affordability.
Roy noted that 97% of firms with 50 or more employees already offer health benefits and that the mandate seems like overkill to induce 3% of companies to offer healthcare insurance. He said the mandate "perversely incentivizes employers avoid hiring low-income workers" who might require subsidies to afford coverage and triggering a penalty for employers. He added that in lieu of paying the penalty, employers might turn to hiring "illegal immigrants, who are ineligible for subsidies."
Falk, who operates 12 franchised business units with more than 100 employees, including 43 full-time employees, said that as he looks at growing his business "the employer mandate…has an undeniable impact on my bottom line and is making me reconsider opening new locations." He added that he might consider reducing the hours of more employees from full-time to part-time to avoid the penalty.
An employer penalty of $2,000 for each full-time worker who receives subsidized insurance provides a "strong disincentive to for firms to higher workers from lower income households because they might become eligible for subsidies," stated Capretta. He said the news is full of stories about companies and local governments that are "racing to move as many workers as possible" to part-time status. "That is exactly what the American economy does not need… with the unemployment rate holding at 7.6%."
Jost countered that the penalty doesn't apply to the first 30 employees receiving a subsidy. "The discount was created to mitigate against potential disincentives to grow a business above 50 workers."
But Rep. Paul Ryan (R-WI) stated that employers are comparing the cost of the penalty versus the cost of offering insurance and he expects competition to force employers to dump a lot of employees on the exchanges.
Rep. Ron Kind (D-WI) responded that he expects competition to have the opposite effect. "They make a business calculation that it's good for [employee] recruitment and retention. And it's just the right thing to do."
Dennis of the NFIB noted that PPACA defines affordable coverage as less than 9.5% of household income. "No employer wants to ask employees about household income for legal, ethical, and human relations reasons."
Rep. Kind stated that 93% of the NFIB membership has fewer than 40 employees. "They wouldn't even be impacted by the employer mandate."
The committee ventured into a discussion of what other aspects of PPACA might also face a delay in implementation.
"The administration is in triage mode," said Jost. "They don't have the resources to implement all of the provisions on time. The way this law was intended to be implemented the states were going to take much of the responsibility." Since that hasn't happened, the administration has a bigger job on its hands.
"I think the administration is under a lot of pressure," added Jost. "I think they are trying to decide what needs to be done right now and what can wait a little bit. I think they are going to focus on what is absolutely essential?the individual premium tax credits, the individual mandate, and getting the exchanges up and running."
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
