Health Care Reform's Employer Penalties Delayed For a Year Health Care Reform's Employer Penalties Delayed For a Year

Health Care Reform's Employer Penalties Delayed For a Year

In an unexpected move on July 2, 2013, the Obama Administration delayed for a year a central piece of the Affordable Care Act – the ACA's employer reporting and "shared responsibility" provisions (also known as the "employer penalty" or "pay-or-play" provisions). The shared responsibility provisions impose monetary assessments on employers with more than 50 full-time equivalent employees if they do not offer affordable health care coverage with minimum value to employees who work an average of 30 hours per week or more.

 

Executive Summary

What Is Delayed?  The employer reporting and shared responsibility provisions – also referred to as "employer penalty" or "pay-or-play" provisions.  The shared responsibility provisions impose monetary assessments on employers with more than 50 full-time equivalent employees if they do not offer affordable, minimum-value health care coverage to employees who work an average of 30 hours per week or more.
 
How Long Is The Delay?   It is a delay of one year – from 2014 to 2015.
 
What Does This Mean?  Employers have one additional year to consider how to implement the shared responsibility provisions.  This includes more time to:
  • Determine who works 30 hours or more a week
  • Work through how to address seasonal, part-time, and contract worker issues
  • Decide whether to have a set hours requirement for certain job positions, and to decide whether job descriptions need to be created or modified
  • Decide what will be the best approach to determine measurement periods
  • Evaluate plan document changes that will be needed to implement eligibility changes
  • Evaluate "affordability" of coverage, and whether coverage provides "minimum value"
  • Coordinate changes with payroll
  • Evaluate whether fully insured or self-insured plan status is desired
  • Evaluate the pros and cons of benefit plan designs and benefit plan option consolidation
  • Evaluate interest in private exchanges

What Do Employers Still Need To Do – What Wasn't Delayed?  Many parts of the ACA are not delayed.  Employers still must:

  • Calculate and pay the Patient Centered Outcomes Research Institute (PCORI) Fee
  • Distribute the Exchange Coverage Notice to all employees this fall
  • Update Summaries of Benefits and Coverage (SBC) this fall for 2014
  • Report the value of group health coverage on Forms W-2 in January 2014
  • Implement numerous 2014 coverage mandates and ensure plan documents and vendor administration coordinate (see the list of coverage mandates below)
  • Calculate and pay of the Transitional Reinsurance Fee in 2014
Does This Affect The Implementation Of The Public Exchanges Or The Individual Mandate?  No. The public exchanges, the individual mandate, and premium subsidies for low- and middle-income individuals will still go into effect.
 
What Is Unanswered?  The delay raises many questions, such as how to address special rules and safe harbors that have been implemented to date regarding measurement periods, fiscal year plan years and detailed effective dates, so additional guidance will be needed.
 
What Does This Mean In A Nut Shell?  The delay provides a welcome relief to employers struggling to implement the shared responsibility provisions by their fall 2013 enrollment. However, beyond that, this merely allows employers needed time to comply with the current requirements and evaluate how to implement the delayed shared responsibility requirements. This does not provide employers a vacation from health care reform, but merely an opportunity to catch their breath.

 

Surprise Announcement

In a July 2, 2013, blog post on the U.S. Department of Treasury's website entitled "Continuing to Implement the ACA in a Careful, Thoughtful Manner," Assistant Secretary for Tax Policy Mark Mazur announced that the ACA's shared responsibility payments will not apply for 2014, which was their scheduled implementation year. Instead, employer shared responsibility payments will not apply until 2015. Mazur's post also announced that new employer reporting requirements will also be delayed until 2015. According to Mazur, the Obama Administration "heard concerns about the complexity of the requirements and the need for more time to implement them effectively." Recognizing that many employers already provide health insurance to their workers, the Administration wants "to make sure it is easy for others to do so." In a related post on the White House web site, President Obama's Senior Advisor, Valerie Jarrett, indicated in "ongoing discussions with businesses we have heard that you need the time to get this right" and that the White House is delaying the shared responsibility and employer reporting requirements because it "is listening."
 
The Internal Revenue Service issued proposed regulations to implement the shared responsibility requirements in late December 2012. Since then, employers have been working diligently to navigate the complex determinations of which employees need to be offered affordable health coverage with minimum value to avoid the shared responsibility assessments. Certain open questions have made implementation of the shared responsibility requirements difficult. For example, universities have struggled with the treatment of adjunct faculty; employers that utilize employees from temporary staffing agencies have had to reevaluate those relationships and agricultural and retail employers have wrestled with how to treat seasonal employees. Many employers have already begun to make difficult choices between reducing employee hours below 30 hours per week (and compromising productivity) and increasing their overhead costs by offering health coverage to employees to whom they have not traditionally offered coverage. Employers have had to confront the implementation of new and complicated hours tracking requirements with very little lead time. The Administration's announcement provides all employers with temporary relief from a rushed and uncertain implementation.
 

 

Many Provisions Are Not Delayed

However, the Administration's announcement is not a license for employers to disregard ongoing compliance obligations that are not affected by the delay. Several provisions of the ACA are still scheduled to go forward in 2013 and 2014:
 
  • The Patient Centered Outcomes Research Institute fee imposed on insurance issuers and self-insured employer health plans remains due on July 31, 2013.
  • Employers must distribute the Exchange Coverage Notice to current employees no later than Oct. 1, 2013, informing employees about the existence of new health insurance exchanges that remain scheduled to enroll individuals by Oct. 1, 2013 in health insurance options.
  • Updated Summaries of Benefits and Coverage will need to be drafted and reviewed for the 2014 plan year.
  • Employers that issued more than 250 Forms W-2 in 2012 will still need to report the value of group health plan coverage provided to employees on Forms W-2 issued in January 2014 for the 2013 tax year.
  • Several new health insurance coverage mandates must be implemented by health insurance policies and self-insured employer health plans as early as Jan. 1, 2014. These mandates include:
    • All pre-existing condition exclusions must be eliminated.
    • Any remaining annual dollar limits on essential health benefits must be removed.
    • Any remaining restrictions on coverage for adult children must be eliminated.
    • Plans must reduce any applicable waiting periods for coverage to less than 90 days.
    • Non-grandfathered plans must reduce employee cost-sharing to prescribed limits.
    • Non-grandfathered plans must cover costs related to clinical trials for the treatment of cancer and other life-threatening diseases or conditions.
    • Revisions to wellness programs must be made to comply with recently issued regulations.
  • The Transitional Reinsurance Fee of $63 per covered life under an insurance policy or self-insured employer health plan is still due for 2014 and will be payable in late 2014 or early 2015.
The delay does not affect the requirement for individuals to pay an individual tax penalty if they fail to obtain minimum essential health coverage by 2014 – the ACA's so-called "individual mandate." Because of the delay of the shared responsibility requirements, many individuals will not be eligible for employer provided coverage, leaving such individuals to obtain health insurance coverage in the private health insurance market or on the ACA-created health insurance exchanges. Low- and middle-income individuals who do not have access to affordable employer-provided health coverage may also be eligible for subsidies (in the form of advanceable tax credits) from the federal government to help them pay for coverage on the health insurance exchanges. While the individual mandate and tax credits have not been delayed, it is not yet clear how these provisions will be implemented without the delayed employer reporting and shared responsibility requirements.
 

 

Where Do We Go From Here?

Without doubt, many employers will welcome the additional time to implement tracking and reporting systems to comply with the shared responsibility and reporting requirements.  However, new uncertainties exist. For example, will current safe harbors for measuring employees' hours be modified? How will transition relief for non-calendar year plans be affected? These and other questions will be addressed in upcoming guidance. Indeed, we expect initial guidance related to the delay to be issued as early as next week. As new guidance is issued, we will provide updates.
 
In short, we strongly recommend that employers not lose steam on implementation. Many ACA requirements have not been delayed and must be put into place in the very near future. In addition, employers should use the extra time afforded by the delay to more methodically consider the implications and implementation of the shared responsibility requirements by taking actions such as:
 
  • Considering alternative plans options and/or consolidations (including evaluating interest in "private" health insurance exchanges)
  • Evaluating whether fully insured or self-insured health plan designs are desirable
  • Reviewing payroll and premium structures to ensure coverage will be affordable by 2015 and to mitigate potential loss of premium income from employees and coordinating those changes with payroll departments
  • Analyzing workforces to understand which employees average at least 30 hours per week
  • Deciding whether to have a set hours requirement for certain job positions and whether job descriptions need to be created or modified
  • Identifying unique employment situations where determining employees' hours is not straightforward such as adjunct instructors, airline pilots, commissioned salespeople, and other groups that are not paid on a traditional hourly or salaried basis
  • Establishing measurement periods to measure employees' working hours
  • Determining open enrollment and administrative periods during which eligible employees will be offered coverage for 2015
  • Evaluating plan document amendments that will be needed to implement eligibility changes
  • Understanding the financial effects of shared responsibility assessments if the employer does not provide affordable coverage for some or all of its employees
  • Evaluating responsibilities for providing coverage to "temporary" workers provided through staffing agencies, as well as seasonal, part-time, and contract workers
  • Monitoring new guidance that will be forthcoming about complying with the shared responsibility and reporting requirements
A delay is welcome, but it should not be squandered by ignoring the shared responsibility requirements until they are once again looming with a short time to implement.

 

For more information about PPACA employer responsibilities or other employee benefits matters, please contact Mary Beth BraitmanMelissa Proffitt ReeseChris SearsTara Schulstad SciscoeSarah FunkeShalina Schaefer or any member of Ice Miller's Employee Benefits Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
 
 
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