Of course, there are politicians and there are bureaucrats. Officials in even the reddest of red-states have been quietly preparing for implementation. Michael Koetting, the deputy director for planning and reform implementation for the Healthcare and Family Services Department in Illinois, which will be sharing exchange-management responsibilities with the federal government, said he frequently talks to his counterparts in other states at meetings called by federal officials. “They want to make all of this work out somehow,” he said. “The difference between that meeting, and, say, a meeting of the governors’ association on exchanges that I went to is palpable.”
The law creates these marketplaces for the minority of people who buy their own health coverage, but it also creates a raft of new rules for employers, still the dominant providers of insurance in the country. Any employer with the equivalent of more than 50 full-time workers is required to offer affordable coverage that meets minimum benefit standards for all of its employees who work more than 30 hours a week.
It will be a big change for nearly every company. For the largest corporations, which already offer comprehensive coverage to their salaried workers, these changes are significant but not too disruptive. But industries that have traditionally relied on hourly workforces or operate on tight margins are struggling to fit the rules into the law’s employment model. If they fail to offer coverage, they will pay a per-employee penalty. If they offer coverage, but employees still buy on the exchanges, they will pay a penalty, too.
“No matter how many employees you have—whether you’re a smaller company or a larger company, I think you’re going to have an issue,” said Christine Pollack, the vice president of government affairs at the Retail Industry Leaders Association, a trade group for the big-box stores. “This is the single largest change to the employer-sponsored insurance system since its creation.”
A recent survey conducted by the benefits consulting firm Mercer found that nearly a third of its clients expected the changes to raise their costs by more than 3 percent. Many employers told Mercer they were considering shifting more workers to part-time schedules or reducing the size of their workforces to avoid the requirements. “They’re trying to figure out what are the alternate strategies,” said Tracy Watts, a partner at Mercer.
How many businesses will end up shifting their workforces is yet to be seen. The restaurant group Darden, which owns the Olive Garden and Red Lobster chains, had said earlier this year that it would move more employees to part-time schedules to avoid the law’s strictures. Last week, it changed course, saying it had determined that keeping full-time employees was a better business strategy. In Massachusetts, the retail and restaurant industries howled about similar requirements, but research from the Urban Institute found that several years after implementation of the state’s health law, the state saw no disproportionate erosion in its share of full- or part-time jobs in those industries, despite the complaints.
However, it does seem clear that some businesses will struggle to absorb the additional cost of insurance—which averages about $15,000 a year for a family plan, according to the Kaiser Family Foundation. Rebecca Lloyd, the vice president of Arnan Development Corp. and Otsego Ready Mix, in Oneonta, N.Y., said that her company has been offering health coverage to its low-wage workforce for years but is likely to drop it come 2014. Her business can’t afford to offer family plans, making it eligible for penalties every time an employee’s child enrolls in a public program. She’s weighing the various options—giving employees cash to spend in the exchange, trimming the size of her workforce, splitting up the company.
“How am I going to abide by the new rules and still provide for the employees?” Lloyd wondered. “Because the last thing I want to do is hurt our employees.”
Kathleen Sebelius: The secretary of Health and Human Services will have dual tasks in the second term—bureaucrat and saleswoman. HHS must make the complex law work by 2014, and win buy-in from states and the uninsured.
Gary Cohen: He runs the newly formed HHS office in charge of insurance regulation and oversight. His office will be tasked with managing state exchanges and setting new standards for insurance products.
Nancy-Ann DeParle: The White House deputy chief of staff is a leader on health care policy there, and she ran Medicare, Medicaid, and the Children’s Health Insurance Program in the Clinton administration.
Bobby Jindal: The Louisiana governor and new chairman of the Republican Governors Association will be a thorn in the side of the Obama administration. He knows health policy and opposes the law’s implementation.
UP: Regulations: After a preelection bottleneck, the Obama administration has begun releasing major proposed rules that states and the private sector need to prepare for the new insurance markets coming in 2014.
DOWN: Repeal: The election results mean that Republican efforts to eliminate or gut the health care law in Congress will not succeed until after most of its major provisions are enacted.
LEVEL: State exchanges: Despite two deadline extensions, only a minority of states have submitted applications to create their own insurance marketplaces in 2014. Most will share responsibilities with the federal government or default to a federal system.
Lara Seligman contributed
This article appears in the Dec. 15, 2012, edition of National Journal as Law of the Land.