Employers can postpone plans to expand coverage to new classes of employees or change cost-sharing structures to comply with affordability requirements.
No Free Pass
“The delay will give employers more time to cope with some of the requirements, but they know it’s no free pass,” according to an alert by HR consultancy Mercer. “In the short term, new fees, plan design changes and the expectation of additional enrollment will add an estimated 2–3 percent or more to health plan cost in 2014, even if employers table plans to extend coverage to all employees working 30 or more hours per week.”
Moreover, “Employers must still prepare to address employee confusion about their need to have health coverage and their options for coverage—both from their employer and the public exchanges,” advised Mercer.
Time to Review and Adjust Coverage
“This is terrific news for large employers all across the country,” commented Helen Darling, president and CEO of the National Business Group on Health (NBGH), an employers group. “The one-year delay will give employers much-needed additional time to make any necessary changes to their health care benefit programs and any other decisions to meet the law’s requirements. It also gives employers relief from yet to be fully worked out reporting requirements and the administrative burdens of complying with a complex set of rules.”
Steve Wojcik, vice president of public policy at the NBGH, questioned whether delays to other provisions in the PPACA might loom. “Most large employers are well into finalizing benefit changes and plans for 2014,” he said. “It may mean a temporary pause for some; for others it may mean no change in their plans for 2014. But it's definitely a reprieve from reporting requirements and the dollars and staff time that would have been diverted to compliance with the mandate, though the law certainly has other components that have added to plan costs and administrative burdens already.”
Darling advised HR and benefit managers to take time now to review any benefit-program changes they were contemplating for next year and to determine whether further modifications are warranted.
“The delay will most likely have the greatest effect on employers in industries with large numbers of part-time workers and with workforces whose hours fluctuate, including retail, hospitality, entertainment. agriculture and restaurants," Darling observed. "These employers were gearing up for hard decisions about not only health benefits but also staffing. Now they will have more time to make those decisions.”
Coverage Remains Vital
"All of the reasons employers now have for offering coverage to their employees—significant tax subsidies, recruitment and retention of employees, and increased productivity and decreased absenteeism when employees are healthy—will continue to exist without the mandate penalty," said Timothy Jost, a professor at the Washington and Lee University School of Law, in a commentary on the Health Affairs Blog.
"It is to be hoped, moreover, that employers who have been claiming that they have to reduce their employees’ hours of work to below 30 to avoid the penalties will restore the lost hours, and small employers fearful of growing over the 50 [full-time equivalent] threshold will focus on growing their businesses rather than worrying about the ACA," Jost added.
"We applaud the Obama administration's decision to delay until 2015 employers' reporting requirements and potential employer penalty payments under the Affordable Care Act," said James A. Klein, president of the American Benefits Council, an employers group. "This provides vital breathing room to implement the law in a more thoughtful and administrable way."
A critical view of health care reform was reiterated by the National Federation of Independent Business, a small-business lobby long opposed to the reform act. “Temporary relief is small consolation; we need a permanent fix to this provision to provide long-term relief for small employers,” Amanda Austin, the group's director of federal public policy, said in a statement.
"Play or Pay" Penalties Delayed
Starting in 2015, employers with 50 or more full-time employees or equivalents that do not offer coverage to their full-time employees face a penalty of $2,000 times the total number of full-time employees (minus 30) if at least one full-time employee receives a premium tax credit/subsidy to purchase coverage through a government-run health insurance exchange established under the PPACA.
Full-time employees are those who average 30 or more hours of work per week. The penalty is waived for the first 30 full-time employees. The penalty is 1/12 of $2,000 for any applicable month.
Employees with household income between 100 percent and 400 percent of the federal poverty level are eligible for tax credits for exchange coverage if they do not have access to affordable employer-sponsored coverage that is of at least a minimum value.
If employers with 50 or more full-time employees or equivalents do offer coverage to their full-time employees but the coverage is “unaffordable” (9.5 percent of income or higher) to certain employees or does not provide “minimum value” (the plan’s share of total cost of benefits under the plan is less than 60 percent), the employers face a penalty of $3,000 times the number of full-time employees receiving a premium tax credit/subsidy for exchange coverage (not to exceed $2,000 times the total number of full-time employees minus 30).
Small Group Market Plans
“The administration did not delay the many new requirements facing employers who choose to offer health insurance in the small group market—employers with less than 50 workers,” noted Robert Laszewski, president of Health Policy and Strategy Associates, in a post on The Health Care Blog. “While small employers are not required to offer coverage, if they do they come under that large number of new essential health benefit mandates and group rating rules that won’t apply to large employers.”
He added, “While the new health law enabled small groups to benefit from ‘grandfather’ rules by being able to keep their current benefit package, it has been estimated that only about 15 percent of employers will still be grandfathered come 2014 because of how stringent the administration made those rules.”
Small Group Plans and Essential Health Benefits
The Affordable Care Act defines a small employer as having at least one but no more than 100 employees. However, it provides states the option of defining small employers as having at least one but not more than 50 employees in plan years beginning before Jan. 1, 2016.
Generally, if you have fewer than 100 employees (using the definition for full-time equivalents) you will be purchasing coverage in the small group market.
Starting Jan. 1, 2014, nongrandfathered, fully insured plans in the individual and small group markets and those in the exchanges were required to provide coverage of benefits or services in 10 separate categories that reflect the scope of benefits covered by a typical employer plan.
Self-insured small group plans, large group plans, and grandfathered plans are not required to offer essential health benefits.
Impact on Subsidies
Without the reporting requirements of the employer mandate in 2014, the government-run exchanges and the IRS will not be able to verify, in most instances, whether employer-provided heatlh coverage is deemed "unaffordable" (costing 9.5 percent or more of a worker's household income) and thus whether employees are eligible for tax credits or subsidies when purchasing coverage on a government-run exchange. "If the IRS doesn't have information about the plans large employers offer, it will be very hard to verify that. It will be an honor system," Nicholas Bagley, a law professor at the University of Michigan, told Reuters.
On July 5, 2013, HHS issued a wide-ranging final rule (to be published in the Federal Register on July 15) that allows the federal government and state-run exchanges to rely heavily on self-reported information by those seeking tax credits/subsidies for policies purchased through an exchange, while auditing a sample of applications for accuracy (at least until 2015, when stronger verification systems may be in place). Along these lines, the final rule states that:
If the Exchange…does not have any available electronic data regarding the employment of an applicant and the members of his or her household or an applicant’s attestation is not reasonably compatible with any available data… we proposed that the Exchange would place the applicant into a pool of applicants from which it would select a statistically significant sample of applicants, from whose employers the Exchange would request information regarding enrollment in an eligible employer-sponsored plan ...
For those individuals who are not part of this sample, the Exchange may accept the attestation of projected annual household income without further verification for purposes of the Exchange’s eligibility determination. We expect that any Exchange that exercises this option will monitor the process closely and adjust the targeting and size of the sampled population as needed to ensure an effective verification process.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Related External Articles:
Some Employers Need to Start Affordable Care Act Measurement Periods in 2013, Perkins Cole LLP, September 2013
IRS Releases Additional Guidance on Delay of PPACA Play or Pay Penalties and Employer Reporting Requirements, Smith, Gambrell & Russell LLP, July 2013
With the Employer Mandate and Insurer Reporting Requirements Delayed, What's Left for 2014?, Troutman Sanders, July 2013
Four Things You Should Know About the Employer Mandate Delay, United Benefit Advisors, July 2013
Implementing Health Reform: A One-Year Employer Mandate Delay, Health Affairs Blog, July 2013
White House Delays Employer Mandate, But What About Rules Burdening Small Employers?, The Health Care Blog, July 2013
Employer Health Care Mandate and Reporting Requirements Delayed Until 2015, Nixon Peabody LLP, July 2013
Health Care Law's Employer Mandate Delayed Until January 2015, PricewaterhouseCoopers, July 2013
Delay in Obamacare Requirement Puts Onus on the Honor System, Reuters, July 2013
Health Insurance Marketplaces Will Not Be Required to Verify Consumer Claims, Washington Post, July 2013
Obamacare Delay Poses Legal Risk to Employers, CFO.com, July 2013
Related SHRM Articles:
Different Reasons Floated for Delay, SHRM Online Legal Issues, July 2013
Health Care Law's 30-Hour Rule Under Fire, SHRM Online Legal Issues, July 2013
Proposed Rule Clarifies Employer Mandate Calculations, SHRM Online Benefits, revised July 2013
A Rose Isn't Necessarily a Rose in PPACA's Baffling Terminology, SHRM Online Legal Issues, June 2013
SHRM Online Benefits page
SHRM Online Health Care Reform Resource Page