PPACA-Obamacare Employer Mandate Pushed Back to 2015

Posted July 3, 2013 by PHaynes

The Employer Mandate portion of PPACA (“The Affordable Care Act”, aka Obamacare) has been pushed back to 2015.  The law’s Individual Mandate has not been pushed back, and neither have PPACA’s taxes and fees.

The White House, on the evening of July 2, in a blog posting from Valerie Jarrett, senior advisor to the President, announced it will suspend for one year reporting requirements in 2014 for larger employers to demonstrate compliance with a mandate to offer employees health insurance coverage, and not enforce financial penalties for larger employers that fail to comply until 2015, one year later than authorized in the Affordable Care Act.

“As we implement this law, we have and will continue to make changes as needed,” Jarrett announced. “In our ongoing discussions with businesses we have heard that you need the time to get this right. We are listening. So in response to your concerns, we are making two changes.

“First, we are cutting red tape and simplifying the reporting process. We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination. So we plan to re-vamp and simplify the reporting process. Some of this detailed reporting may be unnecessary for businesses that more than meet the minimum standards in the law. We will convene employers, insurers, and experts to propose a smarter system and, in the interim, suspend reporting for 2014.

“Second, we are giving businesses more time to comply. As we make these changes, we believe we need to give employers more time to comply with the new rules. Since employer responsibility payments can only be assessed based on this new reporting, payments won’t be collected for 2014. This 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.

“Just like our effort to turn the 21 page application for health insurance into a 3 page application, we are working hard to adapt and to be flexible in employer and insurer reporting as we implement the law.”

Jarrett also asserted that the Administration is “full steam ahead” for state health insurance exchanges to open on October 1, 2013. The complete announcement (blog post) is available here.

Discussion & Commentary

Reagan M. Crawford, Managing Member of AP Benefit Advisors, LLC in Hunt Valley, Maryland called the news “interesting” and said “the devil is in the details—and this calls into question how an employer can move forward knowing that they won’t be subject to fines but their employees might—if certain plans don’t change.”

Patrick C. Haynes, Jr., Esq., LL.M., AP Benefit Advisors’ in-house compliance counsel called the news “surprising—but given the law’s complicated structure, requirements, reporting lines—and that ‘open enrollment’ begins in 89 days—it will be good news to many employers and plan sponsors.”

Forcing employers to make Pay or Play decisions without 100% of the required information, timing and rules hasn’t been pleasant.  Giving them additional time to work through this will be welcome.  Consider the reporting mechanisms (telling HHS/IRS about your health plans), documenting coverage for employees (telling the IRS who has what coverage, and for which dependents), documenting opt-outs (why did your employee opt-out? And, where did his/her other coverage come from?), responding to exchange/marketplace personnel that seek to impose fines, appealing those fines, etc.—many of these processes haven’t been written, documented or even begun.  Further, many may not have even been staffed for yet (let alone all the required systems built).

Consider, that the first few years of reporting in Massachusetts took place with paper forms the employer filled out, collected and sent in. Human beings had to evaluate that data, key it into systems and then follow up on it.  Quickly, Massachusetts moved to an online-web-based system where employers detailed their health plan offerings, pricing, deductibles, caps, limits, etc.; detailed who had what coverage (and for how long), issued 1099-HCs (showing, for example that  Jack & Diane had the 100-80 PPO plan, from carrier XYZ, EIN 12-3456789 for the entire year)—and each federal and state marketplace (exchange) will need similar data points and systems in order to take on this massive task.

While this additional time may be just what “they” need to work through all their issues it does appear to recognize that employers and plan sponsors have their own challenges to work through and this will provide some additional breathing room to work through the regulations.

Hopefully the regulations and guidance that come from this decision will be helpful and clear, and will be sensitive to the fact that many employers will amend their plans anyway because they want the coverage to their employees to be valuable and free from any Individual Mandate fines/taxes/penalties.

As requested – here’s your “In a Nutshell” Summary

THE DELAY

• The requirement for employers with more than 50 full-time equivalent employees to provide health insurance has been delayed from Jan 1, 2014 to 2015 (see White House blog here).
• The law requires companies with 50 or more full-time equivalent employees to offer health benefits or pay penalties. This delay means the penalties will not apply until 2015.  There are no details available yet that would indicate how fiscal-year plans might be affected (E.g. compliance by 1/1/15 or only for plan years on or after 1/1/15)?
• Employers can still comply with the requirements before 2015. Many companies are already compliant or have taken steps to become compliant.  Considering their employees would be penalized under the Individual Mandate most employers are still seeking to offer valuable, compliant and affordable coverage.
• The Treasury Department will be issuing updated regulations (maybe rather soon).  See their recent post here.

THE REASONS?

• Medium and large-sized businesses need more time to comply with complex rules and reporting requirements
• Forbes estimates that “Half of Employers Aren’t Ready for Rollout.”
• Political observers report that the delay could be intended to provide political cover for Democratic congressional candidates and incumbent members of congress ahead of 2014 mid-term elections.

WHAT IS STAYING THE SAME?

• Individual policies will still be available through subsidized exchanges.
• The “Individual mandate” is still in effect – individuals without coverage could face tax penalties when filing their 1040.  Penalties begin in 2014 with the greater of 1% or your income or $95/adult and half that for each child.
• The prohibitions against preexisting condition exclusions remains.
• Your plan must still not have any annual dollar limits on essential health benefits.

Links:

• White House Blog Post
• IRS Notice 2013-45 (provides very little guidance)
• Citizens taking to Twitter to discuss their disapproval
• Politicians seeking to make the delay permanent
• Proposed – House Bill to exempt small employers (move threshold to 100 employees, currently set at 50 employees)
• Opinion – Why Is Obamacare’s Employer Mandate Delayed Until after 2014 Elections?
• Washington Post –Delayed employer mandate the latest change for increasingly unsteady health-care law