ObamaCare Update: Employer Mandate Delayed to Jan 1, 2015
ACA UPDATE: Employer Mandate Postponed to January 1, 2015
The Patient Protection and Affordable Care Act (referred to variously as “PPACA", the “ACA", “health care reform" or “ObamaCare") was enacted in 2010 and is being rolled out in stages through 2018. The implementation of these provisions is imposing many new burdens on employers.
The provision of ObamaCare with the greatest impact on employers is the Employer Mandate, or “Employer Shared Responsibility" as it is referred to in the regulations. This provision of the ACA requires employers with 50 employees or more to offer health coverage to all full-time employees or pay a fine. Originally scheduled to be effective on January 1, 2014, the Obama administration announced on July 2, 2013 that the effective date will be delayed one year, to January 1, 2015.
While the effective date of the Employer Mandate has been delayed for one year, as of this writing two other important provisions of the law are still on schedule to be effective on October 1, 2013 and January 1, 2014. The Health Insurance Exchanges are still scheduled to be up and running by October 1, 2013, and all employers (regardless of size) are required to issue to their employees a written Notice to Employees of Coverage Options (the “Coverage Options Notice") by October 1, 2013. Starting October 1, 2013, employers must provide the Coverage Options Notice to each new employee at the time of hiring. With respect to current workers, employers are required to provide the notice by October 1. The notice must be provided automatically, free of charge, and written in language that the average employee can understand. It may be provided in-hand, by first-class mail or electronically, if the requirements of the US Department of Labor's electronic disclosure safe harbor are met. The US DOL has a user-friendly form of Coverage Options Notice on its website at http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf (for employers who do not offer a health plan) and at http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf (for employers who do offer a health plan).
The second provision of the law that has not (so far) been delayed is the Individual Mandate. Effective January 1, 2014, all individuals (with certain very limited exceptions) must purchase qualifying health insurance. To be “qualifying" the insurance must cover a specific menu of services, including ambulatory patient services, emergency services, hospitalization, maternity and newborn care and other services. Individuals buying plans on the Health Insurance Exchanges will be able to choose between four levels of coverage next year: platinum, gold, silver and bronze. Platinum plans will carry the highest premiums but offer the lowest out-of-pocket expenses, with enrollees paying no more than 10%, on average. At the other end of the spectrum are bronze plans, which will have the lowest monthly premiums but higher deductibles and co-payments totaling up to 40% of out-of-pocket costs, on average. Starting in 2014, all Americans will be required to carry health coverage or face fines. The penalties start at $95 per adult or 1% of adjusted family income, whichever is greater, and escalate in later years. Penalties will be collected through the filing of the individual’s tax return and the IRS will have all the usual collection weapons at its disposal to ensure compliance.
People with annual income of up to 400% of the poverty line -- or roughly $45,000 for an individual and about $92,000 for a family of four -- will get federal subsidies to help defray the premium costs. Insurance experts predict that most of the individual plans that will be available on the Exchange, even the lowest-level “bronze" plans, are likely to charge higher premiums than the most bare-bones, high deductible, individual insurance currently available on the market. For many customers, though, those costs will be offset by lower out-of-pocket costs and more comprehensive coverage.
While perhaps not obvious at first blush, the Individual Mandate may raise some issues for employers. First, employees may seek more information about the coverage offered by the employer. HR professionals should be prepared to answer questions about the Individual Mandate and the Exchanges. Second, the Individual Mandate may increase participation in your health plan if you already offer insurance. Those young, healthy employees who previously opted to go without insurance will likely enroll. Employers should consult with their health benefits advisors about whether or how this will impact your plan design and total health care costs.
The recent announcement that the Employer Mandate will be delayed until January 1, 2015 gives employers with more than 50 employees (and employers approaching 50 employees) more time to develop a strategy to comply with the ACA’s requirements. Employers need to work with their benefits advisors and, yes, their attorneys, to analyze the various factors at work. Employers would be well advised to take advantage of this extra time to learn as much as possible about the requirements and to consult with their professional advisors well ahead of the January 1, 2015 deadline.