Sunday, July 17, 2011

Devil in the details of health insurance mandate

Three years from now most companies will be required by federal law to provide health insurance to their employees.  According to a WSJ article, the law requires that "employers with 50 or more full-time workers must offer affordable insurance or pay a penalty."  But what exactly does that mean?  In particular, who is a full-time worker and how does one determine whether insurance is affordable?

In many industries the size of the workforce varies significantly from week to week and month to month.  Lots of stevedores work long hours when ships are in port, but jobs and hours are slim pickings when the docks are empty.  The law defines full-time as averaging 30 hours per week over a month-long interval, but some employers have argues a three to 12 month interval is needed to make a realistic determination.  Of course, in industries with high turnover, a longer interval works in the employer's favor.  And what is to stop employers from capping hours to avoid the mandate?

As for affordability, the regulations currently under review define this as 9.5% of an employee's household income.  But how can an employer know the income received from investments and other household members? 


The Internal Revenue Service is working with other federal agencies to develop the final regs, which could have a significant effect on the labor market. 

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