By: Mensing Consulting Solutions
Late in the afternoon before a holiday weekend, the Treasury Department made an announcement via the Treasury Notes blog that rocked the business community. There will be a one year delay (until January 1, 2015) of a key mandate of the Affordable Care Act (ACA). Simply stated, the provision mandates that employers with 50 or more full-time equivalent employees either provide health care coverage to their full-time employees, or pay penalties. Hence the “play or pay” analogy -- provide insurance that meets certain government standards and implement the required data collection and reporting that goes along with it, or pay a substantial per employee fine. On July 5 of 2013 the Department of Health and Human Services issued a 606-page regulation announcing that state health exchanges would not verify the eligibility of those applying for Obamacare health insurance subsidies. That regulation is a subject for another discussion; for now, we address the delay in enforcement of play or pay.
Speculation was rampant as to the reason(s) – even the legality – of the Administration unilaterally changing a provision codified in law. Is it permissible for an Administration to dispense with compliance with some or all of a law, and if so, does that apply to any Administration and any law? Do individuals have the same right? Was it, as stated, that the Administration had listened to businesses and wanted to provide more time to comply? Was it that the logistics of the ACA had not been thought through well before passing the law and the government itself was not prepared to enforce it? Was it that Federal agency staffers, tasked with the interpretation and enforcement of the ACA, and now also impacted by both the furlough and the herculean task of revamping regulations in the wake of the Supreme Court’s ruling on the Defense of Marriage Act (DOMA), simply completely overwhelmed? Did delaying an unpopular mandate past the 2014 elections play any role? The reach of the delay may or may not be enormous. No one can say for sure, but here is what we do know:
· At first blush, the small employer might think: “Who cares?” Small employers are not directly impacted by the delay in the mandate, since the mandate does not apply to them. However as small business owners know, often what is implemented first for larger businesses is a preview of what is “coming to a theater near you.” Legislation impacting business tends to be phased in from large to small business. Also, small business cannot escape the impacts of costs in healthcare and healthcare insurance. Changes to key components of healthcare (see below “What stays the same”) will impact costs to all, and the ability to offer healthcare coverage has a direct impact on the ability to remain competitive, and recruit and retain talent.
Small businesses should also beware the adverse impact of increased government fines as a result of the delay of the mandate. You see, the government was planning to partially fund the cost of operating the exchange with the revenue from fines imposed on those that failed to comply with the coverage mandate. Without the revenue from fines, other government agencies will inevitably need to ramp up their audits to generate revenue from imposing fines in other areas of non-compliance; ICE, DOL, EEOC, and more!
· There is still a tax credit available to small, “qualified” employers providing health insurance (with lots of qualifiers to meet first).
· So what does the delay mean? The delay applies to the mandate on “large” employers. For purposes of the ACA only, “large” employers are those who employ 50 or more full-time equivalents. The delay means employers have more time to figure out:
What stays the same?
· The delay applies to the reporting and penalty portion only -- other ACA provisions stay in place, including:
Every company is unique – let us help you evaluate the impact of the ACA on your company and projected growth.
Late in the afternoon before a holiday weekend, the Treasury Department made an announcement via the Treasury Notes blog that rocked the business community. There will be a one year delay (until January 1, 2015) of a key mandate of the Affordable Care Act (ACA). Simply stated, the provision mandates that employers with 50 or more full-time equivalent employees either provide health care coverage to their full-time employees, or pay penalties. Hence the “play or pay” analogy -- provide insurance that meets certain government standards and implement the required data collection and reporting that goes along with it, or pay a substantial per employee fine. On July 5 of 2013 the Department of Health and Human Services issued a 606-page regulation announcing that state health exchanges would not verify the eligibility of those applying for Obamacare health insurance subsidies. That regulation is a subject for another discussion; for now, we address the delay in enforcement of play or pay.
Speculation was rampant as to the reason(s) – even the legality – of the Administration unilaterally changing a provision codified in law. Is it permissible for an Administration to dispense with compliance with some or all of a law, and if so, does that apply to any Administration and any law? Do individuals have the same right? Was it, as stated, that the Administration had listened to businesses and wanted to provide more time to comply? Was it that the logistics of the ACA had not been thought through well before passing the law and the government itself was not prepared to enforce it? Was it that Federal agency staffers, tasked with the interpretation and enforcement of the ACA, and now also impacted by both the furlough and the herculean task of revamping regulations in the wake of the Supreme Court’s ruling on the Defense of Marriage Act (DOMA), simply completely overwhelmed? Did delaying an unpopular mandate past the 2014 elections play any role? The reach of the delay may or may not be enormous. No one can say for sure, but here is what we do know:
· At first blush, the small employer might think: “Who cares?” Small employers are not directly impacted by the delay in the mandate, since the mandate does not apply to them. However as small business owners know, often what is implemented first for larger businesses is a preview of what is “coming to a theater near you.” Legislation impacting business tends to be phased in from large to small business. Also, small business cannot escape the impacts of costs in healthcare and healthcare insurance. Changes to key components of healthcare (see below “What stays the same”) will impact costs to all, and the ability to offer healthcare coverage has a direct impact on the ability to remain competitive, and recruit and retain talent.
Small businesses should also beware the adverse impact of increased government fines as a result of the delay of the mandate. You see, the government was planning to partially fund the cost of operating the exchange with the revenue from fines imposed on those that failed to comply with the coverage mandate. Without the revenue from fines, other government agencies will inevitably need to ramp up their audits to generate revenue from imposing fines in other areas of non-compliance; ICE, DOL, EEOC, and more!
· There is still a tax credit available to small, “qualified” employers providing health insurance (with lots of qualifiers to meet first).
· So what does the delay mean? The delay applies to the mandate on “large” employers. For purposes of the ACA only, “large” employers are those who employ 50 or more full-time equivalents. The delay means employers have more time to figure out:
- What is “minimum essential coverage”?
- What is “minimum value”?
- What is the definition of “affordable” to the employees of this specific business?
- How many “full-time equivalents” does the business employ, and is that calculated correctly according to government definition and formula?
- How, when, and to whom is this reported?
What stays the same?
· The delay applies to the reporting and penalty portion only -- other ACA provisions stay in place, including:
- Requirements for health plans to ban annual dollar limits on essential health benefits
- A 90-day limit on eligibility waiting periods
- New out-of-pocket maximums
- Elimination of preexisting condition exclusions for adults
- Coverage of clinical trial participant costs
- Health plan sponsors must still pay new fees, notably “PCORI” (Patient Centered Outcomes Research Institute) and reinsurance fees
- Coverage of recommended preventative care, including contraceptive services, with no cost-share
- Certain wellness program requirements
- Employer mandate to provide written notices about the government run exchanges (“Exchange Notice”) by October 1, 2013
- Mandate to determine if the employer’s group health plans meet the 'minimum value' requirements under ACA for the 2014 plan year. Why? This information is required to be included on the summary of benefits and coverage (SBCs) that employers must provide for coverage beginning on Jan 1, 2014 or later. Thus these SBCs must be provided during the fall 2013 open enrollment season.
- Reporting health care costs on the employee’s W-2, with certain exceptions
- Grandfathered plans must cover dependent children to age 26 even if the child has access to his/her own employer-provided coverage
Every company is unique – let us help you evaluate the impact of the ACA on your company and projected growth.
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