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Delayed: Obamacare’s employer mandate for small businesses

Monday, 10 Feb 2014 | 4:15 PM ET
Employer health-care mandate delayed
Monday, 10 Feb 2014 | 4:16 PM ET
CNBC's John Harwood reports the employer health-care mandate under Obamacare will be delayed until 2016 for firms with 50-99 employees.

The federal government announced yet another delay in Obamacare's rules for employers on Monday, and also weakened requirements for complying with the law.

The government will now exempt companies employing between 50 and 100 full-time workers from complying with the mandate that they offer employees affordable health insurance by another year, until 2016.

Companies that have 100 or more full-time workers, defined as employees who work more than 30 hours per week, still will have to begin complying with the mandate to offer such coverage in 2015 or face financial penalties of at least $2,000 and up to $3,000 per worker.

Officials said that any business claiming they are eligible for the new one-year delay because they have fewer than 100 workers must certify, under penalty of perjury, that it had not reduced its workforce merely to qualify for that exemption.

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Monday's announced delay for smaller employers comes after last summer's bombshell announcement by the Obama administration that the so-called employer mandate compelling companies with more than 50 full-timers to offer them insurance would be delayed from 2014 until 2015. Companies with fewer than 50 full-timers are totally exempt from the Obamacare mandate to offer health insurance to workers.

In another rule change, the Treasury Department announced that larger companies with 100 or more workers will only have to offer affordable insurance coverage to 70 percent of their full-time workers in 2015 to comply with the law or face penalties, instead of 95 percent, as originally proposed by regulations.

Employers must increase that offer to 95 percent of workers by 2016 under the final rule announced Monday.

That phase-in is being done to give a break to employers who might offer coverage to workers who log 35 more hours per week, but not to ones who work between 30 and 34 hours, officials said.

Treasury officials also revealed that volunteers at government or tax-exempt entities, such as volunteer firefighters and EMTs, will not be considered full-time workers for the sake of the Obamacare mandate's calculations.

On the other hand, educational workers, such as teachers, will not be treated as part-time employees "simply because their school is closed or operating on a limited schedule during the summer," the Treasury said.

Officials Monday said that the one-year delay in the Obamacare mandate for companies with between 50 and 99 full-timers will affect 50 percent of the businesses that were supposed to be complying by 2015.

About 7.8 million workers are employed by the affected businesses.

(Read more: Social Security computer outage to affect HealthCare.gov)

However, those officials also took pains to note that the so-called employer mandate to offer affordable health insurance to workers does not affect 96 percent of the employers in the U.S., because they have fewer than 50 full-time employees. Officials also pointed out that the vast majority of companies with more than 100 workers—which comprise about 75 million workers—already offer affordable health insurance to their employees.

"We've gotten a lot of requests to give some more time to some small businesses that would otherwise be subject to this, and we're responding to that by addressing these businesses," a senior Treasury official told reporters when asked the rationale for the delay.

"We think a phase-in approach is a way to administer the law better, and enhance overall compliance with the law," said the official.

Another official noted when asked what legal authority the administration had to give the year reprieve to smaller businesses, said it was within the discretion of administration officials to issue regulations that tweaked the timing of the law's full effect.

And, "We've done it in a bunch of other areas" before, the official noted.

Last summer's announced delay in the employer mandate was greeted by yowls from Republicans in Congress who objected to the administration making such a change without congressional approval.

It was also met with calls to postpone enforcement of the individual mandate requiring nearly all Americans to obtain health insurance by 2014 or pay a tax penalty next year. The administration rejected that demand.

Sen. Mitch McConnell, the Senate minority leader and Kentucky Republican, said, "The White House seems to have a new exemption from its failed law for a different group every month."

"It's time to extend that exemption to families and individuals—not just businesses. The real answer is to repeal Obamacare and replace it with reforms that lower costs and that Americans support," McConnell said.

House Energy and Commerce Committee Chairman Fred Upton, R-Mich., scoffed about the phase in, saying "Another day, another delay."

"If unilateral delays were an Olympic sport, the White House would sweep the gold, silver, and bronze," said Upton. "Despite the president's many promises, rate shock, cancellations, and lost access to trusted doctors have become a harsh reality for countless Americans. The law's most ardent supporters are now running scared, and this latest delay comes just days after the nonpartisan CBO chief proclaimed the health law 'created a disincentive for people to work.' But we are still left to wonder, what's next? The White House is in full panic mode, and rather putting politics ahead of the public, it is time for fairness for all."

But, a leading retail organization had a different,Olympic-themed spin on the Obama Administration's move.

Neil Trautwein, a vice president of the National Retail Federation, said, "The administration should receive a gold medal for recognizing the enormous complexities of the Affordable Care Act, and it's agility and flexibility in working with retailers and others in crafting these much-needed and common sense reforms and revisions."

Brian Haile, senior vice president for health-care policy at tax preparation firm Jackson Hewitt, said, "This final rule may seem like an obscure accounting matter, but it gets to the heart of whether and how employers hire new workers—and whether these workers will have the opportunity to transition from part time to full time or seasonal to permanent employment."

"All employers in all economic sectors will be reviewing these [announcement] to determine the impact—and how they reduce the marginal cost to their businesses when they add new jobs," Haile said.

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By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan.

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