Posted 8/12/2013 12:00 am
Updated 11 months ago
Remember the battle this time last year about the individual mandate requirements of the Patient Protection and Affordable Care Act (PPACA) that ultimately landed with the Supreme Court? We were told then by the administration and proponents of the PPACA that this element of the health care law was crucial to its funding and survival, and that without it, millions of young, healthy Americans could not be forced into the new system, delivering a younger demographic and its ensuing revenue, both required to fund this health care initiative.
Fast forward one year, and we now learn the employer mandate piece of this legislation — also argued to be central in the funding of exchange subsidies — is really not important. Penalties associated with the employer mandate are expected to generate $140 billion in revenues over the next 10 years according to the Congressional Budget Office, not enough to fund the effort while the U.S. Department of Health and Human Services, the IRS and U.S. Treasury determine how to get it right. However, individuals are still required to comply in 2014 with the individual mandate, and the federal exchanges are still set to launch Jan. 1.
The open enrollment period for these plans is just weeks away. But, the government now states it doesn’t possess the ability to verify eligibility for subsidies under these exchanges; so, determination will be made using the “honor system,” resulting in potentially more issues.
What is being delayed? Large employers with at least 50 full-time employees, including full-time equivalents (FTEs) and employers with self-funded plans, will not be required in 2014 to:
• Consider whether they employ on average 50 or more full-time employees, including FTEs, on business days during the previous calendar year. Now with the extension, questions remain on how the look-back period for deter- mination of full-time status will be handled going forward.
• Count employees’ hours to determine whether they average 30 or more hours per week. There remains considerable dispute regarding this rule.
• Offer coverage to employees who average 30 or more hours per week.
• Offer minimum essential coverage to all full-time employees and dependents.
• Offer coverage that meets the minimum value requirement.
• Offer coverage that is deemed affordable.
• Pay penalties for not meeting the above requirements.
For the most part, large employers are ecstatic over this one-year reprieve. For the past two years, they have expended time, resources and capital to comply with the new “pay or play” rules with little guidance from the government. There could be an immediate benefit to employers, employees and perhaps the economy with this one-year respite. First, employers should be less likely to cut workers to below 30 hours to reduce the impact of the penalties. Restaurants, hotels and retail establishments are perhaps the biggest benefactors of this reprieve.
Second, many employees with families could see an unexpected benefit. Employers that offer coverage only to employees and not dependents are likely to be more cooperative in efforts to get uninsured employees and dependents signed up under the various PPACA programs because they know they won’t face penalties next year.
However, one concern over this delay is a potential erosion of employer-sponsored medical plans in 2014. With the employer mandate on hold and subsidy verification forfeited, could there be significant migration into the individual exchanges, jeopardizing the minimum participation requirements established by many insurers?
Even with a little breather from the pay-or-play requirements, large employers still face implementation of other components of the law that have fast-approaching deadlines. They must still inform employees on Oct. 1 about the availability of health coverage on the exchanges, and the plans they offer must still comply with the PPACA design rules which include no pre-existing exclusions, no annual dollar limits on essential health benefits, no waiting periods beyond 90 days and limits on cost sharing and deductibles.
Small employers on the other hand — those with fewer than 50 employees — have challenges of their own to deal with come 2014. Mandatory benefit changes coupled with the removal of pre-existing conditions and rating-tier compression will more than likely create double-digit premium increases for many small employers.
As industry experts, one thing we know for sure with the Patient Protection and Affordable Care Act is that every day we find out that we have more to learn.