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Obamacare's Achilles Heel

The employer mandate could be the health law's downfall.

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By and + More

The Affordable Care Act, also known as Obamacare, is President Obama’s signature legislative achievement, but also the Democratic Party’s worst nightmare. After almost four years, the massive health care reform law continues to dominate domestic politics.

A CBS News poll released on Feb. 26 reported that Obama’s approval rating continues to hover in the low 40s. This is a slight decline from January, and is indicative of his approval ratings for the past few months.

At first, Obamacare’s troubles began and ended with the troubled rollout. Easily the most evident problem, the rollout was plagued by website crashes, difficult navigation and unforeseen consequences, prompting a series of haphazard fixes issued by the White House.

[See a collection of political cartoons on Obamacare.]

Problems following technical rollout concerns included, but are not limited to:

  • More than 783,000 volunteer firefighters and 300,000 volunteer EMTs nearly lost their jobs and health insurance because the IRS rules for Obamacare’s employer mandate state that an organization with 50 employees that work more than 30 hours a week must provide health insurance for its personnel or pay a penalty. Almost 1 million first responders would have lost their insurance because of the administration’s lack of foresight and consideration of unforeseen effects such as insufficient funding to meet legal requirements. A special exemption had to be granted for volunteer emergency departments to prevent this occurrence.
  • In Louisiana, hundreds of people with HIV/AIDS nearly lost the ability to use federal funds to buy health insurance before a U.S. district court judge ordered insurance companies to accept the funds. The order lasts for just 14 days and ends on March 11.
  • California reported more than 1 million policyholders received letters saying their health plan would be canceled after December 31. Many other Americans received letters from their insurance agencies informing them they were losing their current health care plan because it didn’t satisfy Obamacare requirements.

For the moment, it seems that the initial bumps from the rollout have been smoothed over. However, an even larger battle is looming on the horizon and will likely be a major point of discussion during the 2014 midterm season – the employer mandate.

The employer mandate might prove to be the Achilles heel of Obamacare. The mandate stipulates that all businesses with more than 50 full-time employees must pay a portion of health coverage for employees who work 30 hours a week or more. While the employer mandate seems philosophically sound at first, critics point out that businesses are incentivized to work around the mandate by cutting employees, hours or benefits. Not only are businesses encouraged to consider keeping employee hours below 30, but they also are prompted to prevent their businesses from exceeding 50 employees.

[See a collection of political cartoons on the economy.]

To combat the problems presented by the mandate, the Obama administration has been postponing its enforcement, giving businesses an additional year or two of leeway before incurring a federal penalty for non-compliance. Businesses with 50 to 99 employees are receiving a two-year grace period, and businesses with more than 100 employees are receiving a year to offer insurance to just 70 percent of employees, down from 95. Obama’s administration will likely use the time during the extension to find a way to resolve the problems the mandate is incurring.

For the past few months, Jed Graham of Investors.com has been tracking a list of job actions to support the theory that Obamacare’s employer mandate is causing cuts to work hours and staffing levels. As of February 3, 401 employers, including more than 100 school districts, have restricted work hours to fewer than 30 per week. Although Graham’s table is a month out of date, the number of employers is likely to have increased rather than decrease because of the mandate’s structure. Employers such as AOL, Target, the United Parcel Service and the University of Virginia are just a few examples of establishments affected by Obamacare.

Interestingly, as of last month, the number of new full-time positions is going up at a much more rapid pace than the number of part-time positions, according to The Atlantic. Time will tell the impact of the employer mandate, set to go into effect 2015 and 2016 depending on the size of the business.

Recently, customers dining at Gator’s Dockside restaurants in central and north Florida noticed they were paying an additional 1 percent surcharge, listed as “ACA.” The restaurant chain announced that the costs associated with ACA compliance could shut down the chain, or prevent the restaurant from offering full-time employment to its employees.

Because a dozen restaurants in the franchise aren’t charging the additional 1 percent, many are concluding that it was implemented to make a political statement. Restaurants could have simply increased menu prices to draw less notice. Adding the surcharge and labeling it ACA draws definite attention to the plight businesses will likely face in the next few years.

As of yet, no other restaurants have made such overt displays, but the actions of Gator’s Dockside restaurants confirms the predictions of many business owners that the ACA would raise menu prices. It brings back memories of Papa John’s CEO John Schnatter’s statement that once the ACA took affect, the new law would cost an additional $.11 to $.15 cents to product per pizza, forcing the pizza chain to raise prices.