Now that the Supreme Court has upheld most of President Obama’s health care law, U.S. businesses by and large appear skeptical about Republican attempts to repeal the law and are rushing to comply with it, surveys show.
While the political drama over the law is far from over, businesses face significant penalties if they fail to comply with its mandates, including providing health care coverage to all full-time employees starting in 2014.
A survey by Mercer, a human resources consulting agency, immediately after the Supreme Court’s June 28 ruling found that the majority of businesses had been waiting until the court acted before complying with the law.
After the high court’s affirmation, the majority of businesses surveyed said they would start setting up systems for carrying out the mandate and other health reforms, with only 16 percent saying they will wait until after the November elections to see whether Republicans make any headway with their drive to repeal the law, Mercer said.
Mercer and other health care groups are advising businesses not to wait.
“Although the law still faces a contentious political outlook, employers should stay on track in their efforts to comply with the law as enacted or else they may face penalties,” said David Rahill, head of Mercer’s health benefits division.
Many economists hoped the high court’s decision would remove one of the major uncertainties that they believe have caused businesses to hesitate about hiring people this year. Providing health insurance to a typical employee costs an average of more than $10,000 a year, so it is a significant expense, especially for companies that employ mostly low-wage workers.
“The ruling eliminates one source of uncertainty,” said Nigel Gault, an economist at IHS Global Insight. But, he said, Republican attempts to repeal the law and obstruct its implementation are inserting a new element of uncertainty into business planning.
The House passed a repeal bill by a mostly party-line vote last week, but the bill is not expected to advance in the Senate this year. For Congress to enact a repeal bill next year, Republicans would not only have to maintain control of the House, they would have to gain control of the Senate and the White House — a scenario that is not given high odds by most political analysts.
Mercer said businesses will have to act quickly to implement new requirements that go into effect this year and next to provide benefit summaries to their employees, limit the size of flexible health-care accounts and increase withholding of Medicare taxes from high-income earners.
Big challenges ahead
The most challenging aspect of the law — requiring businesses to cover full-time staff working 30 hours a week or more or pay a penalty — will not take effect until 2014. Mercer said about 28 percent of employers continue to express concerns about that mandate, but the rest are preparing to carry it out.
“Employers with large part-time populations, such as retailers and health care organizations, are faced with the difficult choice of either increasing the number of employees eligible for coverage or changing their workforce strategy so that employees work fewer hours,” Mr. Rahill said.
“A big jump in enrollment is not economically feasible for many employers,” and some businesses may end up cutting back the work hours of employees rather than offering the benefits, he said.
While most of the debate in Washington has centered on the requirement that businesses cover their employees, Mercer found that most businesses are focused on a different provision of the law.
That provision addresses health care plans that are too generous by the standards set in the law. Such high-cost “Cadillac” plans will be hit with an excise tax starting in 2018, and Mr. Rahill said that is what worries most of the businesses surveyed by Mercer.
He said companies are working hard to try to avoid paying the excise tax, which has already had the effect of slowing increases in insurance costs in the past year or so.
Major business organizations were quick to declare after the Supreme Court ruling that they intend to comply with the law, while continuing to offer encouragement to efforts by Republicans — most notably GOP presidential nominee Mitt Romney— to repeal it.
Big business groups are concerned that the law does not do enough to control fast-growing health care costs, which have made it increasingly difficult for companies to keep offering benefits to their employees.
“Manufacturers have consistently made it clear that lowering costs should be the central focus of any health care reform effort,” said Jay Timmons, president of the National Association of Manufacturers. “Ninety-seven percent of manufacturers offer generous health benefits to their employees, and skyrocketing health care costs represent the single biggest obstacle for them continuing to do so.”
A hit to small business
Small businesses have formed the core of opposition to the law, as they are less likely than big businesses to provide health benefits to their workers.
But even among small businesses, certain concerns will get hit harder than others — particularly restaurants and franchise businesses that employ many low-wage workers who are not currently insured. For that reason, the National Restaurant Association, International Franchise Association and retail trade associations have been among the most vehement opponents of the law.
The franchise association said a survey of its members found that 85 percent were less likely to hire people in the wake of the Supreme Court decision. Only 15 percent said they were more likely to add to their staff.
“We continue to support repeal” of the law, said Steve Caldeira, president of the association.
Jamie Richardson, vice president of the White Castle restaurant chain, recently told Congress that the law already is having a chilling effect on his industry. Although White Castle already provides full health benefits to its full-time employees, many employees who do not currently receive benefits would be eligible under the law, driving up the chain’s health costs by about 20 percent in 2014, he said.
“Many in the industry are worried that our slim profits per employee will not be sufficient to cover the additional cost,” he said.
But some small-business owners said they are glad to have some clarity about how to proceed in hiring new workers now that the Supreme Court has spoken.
“Hopefully, obstructionists have gotten the message and will either put their shoulders to the wheel and work in good faith to make our health care system the best in the world, or stand aside and let the rest of us get on with it,” said Kelly Conklin, owner of Foley-Waite Associates architectural woodworking in Bloomfield, N.J., and a member of the Main Street Alliance, a small-business group that supports the law.
• Patrice Hill can be reached at phill@washingtontimes.com.
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