Media Continues to Misreport ObamaCare Employer Mandate Calculation

By Ashton Ellis

Perhaps the biggest – and costliest – misunderstood ObamaCare regulation is the so-called “Employer Shared Responsibility” requirement, i.e., the mandate that all employers with 50 or more full-time equivalent employees must provide health insurance or pay stiff penalties.

The word equivalent bears emphasizing because it looms large in the text of ObamaCare.

“FULL-TIME EQUIVALENTS TREATED AS FULL-TIME EMPLOYEES,” declares the relevant heading in Title I, Subtitle F, Part II, Section 1513 of the Patient Protection and Affordable Care Act, aka ObamaCare.

In it, the health law spells out how the hours worked by part-time employees will be added together to create full-time equivalent employees for the purpose of deciding whether a business falls under the employer mandate.

Though the legalese is cumbersome, this much is clear: Businesses cannot avoid the employer mandate simply by switching to a part-time workforce.

And yet almost no one else reporting on or analyzing the employer mandate is paying attention to this section.

That’s a huge mistake.

Recent reporting by NBC News and National Review are prime examples.

Last week, NBC said that a Subway franchise owner is “cutting the hours of 50 workers to no more than 29 hours a week so he won’t trigger the provision in the new health care law that requires employers to offer coverage to employees who work 30 hours or more per week.”

Similarly, a post at National Review explained that state and local governments are also reducing work hours to avoid paying ObamaCare’s compliance costs: “In the public sector, the 50-worker threshold is almost always already surpassed. Because the employer mandate pertains only to full-timers, the insurance requirement or penalty doesn’t apply when a worker puts in 29 hours a week or less.”

The implication in both stories – and in almost every other media report on the subject – is that ObamaCare defines a full-time employee as someone who works 30 hours or more a week. If an employer employs 50 such people, then ObamaCare’s employer mandate applies.

Except that it’s just not that simple.

As I explained in a column two weeks ago, ObamaCare’s text is very clear that the employer mandate applies to 50 full-time workers (as defined above).  It also equally applies to a combination of fewer than 50 full-time workers plus the hours of part-timers that, when added together, create 50 full-time equivalent (FTE) employees.

This means that every batch of part-time hours that add up to 30 hours a week becomes – voila! – an FTE employee. If enough FTE employees can be created to meet the 50 full-time threshold, then the employer mandate applies.

In other words, avoiding the mandate is not as simple as cutting everyone’s work week below 30 hours. And yet many businesses and governments seem to be staking their financial futures on that strategy, while respected members of the media fail to point out the problem.

Support for the claim that (almost) everyone else is wrong is drawn from analysis by Andrew Kurz, a respected health policy expert and supporter of ObamaCare. Back in June, he posted a summary of the employer mandate along with the relevant text from the law at his website, HealthReformTrends.com.

In his analysis, Kurz gives an example of how the FTE count would work, and reasoned that the focus by industry and the media on staying below 30 hours a week per employee likely won’t work.

Two weeks ago, the Small Business Administration (SBA) provided official confirmation to Kurz’s prediction. SBA released a slideshow presentation that defines and explains the FTE count in almost the exact way as Kurz did two months prior. (See page three of this link.) Paul Bedard of the DC Examiner flagged the relevant SBA slide, but it seems like no one else has since.

Though the legalese is cumbersome, this much is clear: Businesses cannot avoid the employer mandate simply by switching to a part-time workforce.

Prior to SBA’s explanation, Covered California – the state’s ObamaCare health insurance exchange – noted on its Frequently Asked Questions page that the health law counts FTE employees in calculating whether the mandate applies.

In its commentary, Covered California says:

“Employers with 50 full-time equivalent employees or more that do not offer full-time equivalent employees (and their dependents) the opportunity to enroll in minimum essential health coverage may be subject to penalties beginning in 2015.”

The 2015 reference is politely noting President Obama’s unilateral decision to delay enforcement of the employer mandate for a year.

Of course, like everyone else, Covered California did not know what an FTE employee would be until SBA declared it two weeks ago.

Clicking on the highlighted text “full-time equivalent” in the FAQ answer launches a box saying:

“The federal government has not yet defined ‘full-time’ or ‘full-time equivalent’ for purposes of determining whether a business is small or large. More information will be forthcoming in the months ahead.”

At the time of this publication, Covered California had not updated its FAQ answer to reflect the new information from SBA.

Yes, the employer mandate has been postponed, but news reports of small businesses already making significant employment decisions regarding employee hours are escalating.  That employers are doing so on the basis of near-universal erroneous understandings is yet another of ObamaCare’s disruptive consequences.

Reprinted with Permission

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