On Tuesday, the U.S. Department of Treasury announced that the Obama Administration is delaying a provision of the Affordable Care Act that mandates employers with 50-plus employees provide health insurance or pay a penalty. Initially these businesses were expected to start reporting their coverage in 2014. This has been delayed until 2015.
The announcement "bodes well" for the restaurant industry, as it's expected to be hit hard by the legislation because of its high employee-to-sales ratio, according to Seeking Alpha. Many restaurant leaders have vocally opposed the mandate, claiming it will stifle hiring, cause them to raise menu prices or force layoffs/reduced hours.
The delay was explained on the White House website by Valerie Jarrett, senior advisor to President Obama, who wrote that changes like this will be made as needed as the Administration continues its ongoing discussions with businesses to ensure they "get this right." In response to business leaders' concerns, two changes were announced yesterday:
- Simplified reporting process. The law as it was initially written called for each worker's access to and enrollment in health insurance, which concerned business leaders who would be forced to implement new data collection systems and coordination. In response, the reporting process has been simplified. The Administration said it will convene employers, insurers and experts to propose a "smarter system." In the interim, this detailed reporting will be suspended for 2014.
- Delayed compliance. The second change, mentioned above, gives employers more time to comply with the rules. According to Jarrett, this delay "allows employers the time to test the new reporting systems and make any necessary adaptations to their health benefits while staying the course toward making health coverage more affordable and accessible for their workers."
Small business with less than 50 employees are exempt but can choose to opt-in. They will have access to the Small Business Health Options Program that offers similar purchasing powers as a large business, as well as potential tax credits for coverage. The individual mandate of the ACA remains in place.
As part of Tuesday's announcement, the Treasury Department "strongly encourages" employers to voluntarily report information in respect to the health care coverage offered to full-time employees, in preparation for the full implementation in 2015.
Industry leaders applaud delay
The National Restaurant Association said the delay is a "recognition that the Administration has listened" to its concerns about the "complexity of the requirements and the need for more time to comply."
"As part of our leadership of the Employers for Flexibility in Healthcare Coalition, we have been a vocal advocate in the regulatory process to address the needs of our members and those representing industries with similar workforces," said Dawn Sweeney, CEO and president of the NRA. "We look forward to providing the Administration with additional feedback on how best to implement these significant reporting requirements and provide employers with additional flexibility."
The International Franchise Association responded to the announcement as well, saying it was pleased about the delay. The group, however, urges more relief for small businesses.
"We applaud the administration for responding to our repeated requests to provide relief from the implementation of the Affordable Care Act," said Steve Caldeira, IFA president and CEO. "This will relieve the onerous and costly burdens of the ACA for one year, and allow the Administration to reexamine its implications for small businesses. We look forward to continuing our work with the Administration to ensure that the Affordable Care Act is implemented with minimal negative impact on franchise small business owners."
Some chain leaders were also relieved by the announcement.
"We were ready for the Jan. 1 launch, but we are thankful it was pushed back a year to ease the financial strain this will place on Fazoli's," said Carl Howard, CEO of the chain. "To us this means the 'pay or play' penalties associated with large employers not providing healthcare have been delayed. We will be sorting out what, if anything, could be the financial impact to our business."
Requests for comments from a variety of other restaurant brands have not been returned.
The Treasury Department is expected to publish formal guidance describing this transition in the coming week. Proposed rules regarding reporting are expected later this summer.
More information is available on the U.S. Department of Treasury website.
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Photo provided by Wikimedia.