Delaying The Employer Mandate: Industry Reaction
Implications of Waiting Until 2015
On July 2, the U.S. Treasury Department announced that the Obama administration will provide an additional year before the Patient Protection and Affordable Care Act mandatory employer and insurer reporting requirements begin.
“We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so. We have listened to your feedback. And we are taking action,” said Mark J. Mazur, assistant secretary for tax policy at the U.S. Treasury Department.
The publication Health Insurance Marketplace News asked a number of healthcare thought leaders to weigh in on the implications of this delay. It has shared these insights with Payers & Providers.
Timothy S. Jost, the Robert L. Willett Family Professor of Law at the Washington and Lee University School of Law, did not see the delay as having a far-reaching effect.
“While the announcement that the administration would delay the employer mandate for a year came as a surprise, it should not delay implementation of the remainder of the ACA and should have minimal effect, since the vast majority of large employers offer health insurance to their employees already,” he said. “The administration, starved of resources by Congress, is clearly trying what needs to be done right now; what can wait. Letting the employer mandate wait is a reasonable decision.”
Simeon Schindelman, chief executive officer of Bloom Health, an employee benefit firm in Minneapolis that operates a private insurance exchange, also downplayed the significange.
“For employers more ‘at risk’ of penalties and whose reporting requirements would have been onerous, this is important news," he said. "For private exchange operators, such as Bloom, it is not as significant because employers moving to private exchanges are generally not doing so because of the ACA. Sometimes that is the case, but rarely.”
Schindelman notes that employers use private health insurance exchanges for the following reasons:
1. Help employers attract employees
2. Retain and motivate current employees
3. Reduce HR workload
4. Offer employees more flexibility and control regarding benefits
5. Enhance employer cost predictability,
6. Give employees control over insurance-compensation trade offs,
Jon Kingsdale, a managing director with Wakely Consulting Group in Clearwater, Fla., saw the delay as a positive development for employers.
“This will have little impact on employer offerings in 2014, and gives them sufficient lead-time to document their base-year practices (2014 instead of 2013). Employers now have the time to get their written plan documentation in order and properly notify employees of any applicable measurement periods,” he said. “As a result, many of the transition rules necessary to compress safe harbor measurement rules into the last half of 2013 for a 2014 effective date will no longer be necessary. Rather than begin with transition rules that are the exception, employers can now begin compliance with full measurement periods that are adopted in advance.”
Kim Holland, executive director of state affairs for the Blue Cross Blue Shield Association and the former insurance commissioner for Oklahoma, also felt the delay would reduce the compliance burden for employers.
“The delay in implementation of the large employer mandate is likely not to have a significant impact, as the vast majority of those businesses affected already provide employee health coverage. The delay of the reporting requirements could reduce the compliance burden for health plans and employers next year,” she said.
Holland did caution that the policy change could have implications for enforcement of the individual mandate, which is a statutory provision separate from health plan and employer reporting requirements. She noted that the recent decision by the Obama Administration to initially forego income verification for consumers to purchase insurance through the state healthcare exchanges could cause some future problems.
“Absent further guidance, individuals will continue to have an obligation to self-report coverage on their tax filings in 2014. The IRS may not be able to verify an individual’s claim of coverage. And the delay in employer reporting could complicate an exchange’s ability to verify access to employer coverage in determining whether an individual is eligible for a subsidy,” she said.
Cheryl Smith, specialist leader for the health exchange practice at Deloitte Consulting, said this raises concerns for the operation of the individual exchanges.
“Given that HHS previously indicated it would be flexible (at least initially) in enforcing the individual mandate, I believe the general thinking was that HHS would also be lenient in terms of enforcing the employer mandate. However, I think it’s safe to say that a year delay was a bit unexpected. The delta will now be between ‘leniency’ and ‘no enforcement’. State exchanges now face a number of yet-unanswered questions regarding process and policy.
“For instance, will the change in policy change the size and demography of the exchange population? What will that change mean to operational costs, and will it precipitate a change in the user fee? And if so, what’s now to be done with that information since notification of a penalty assessment will not apply? That said, states that are implementing state-based exchanges have, by and large, already been engaged with their employer community -- both large and small employers -- preparing them for what’s coming.”
Christopher E. Condeluci, of counsel at Venable LLP and the former tax and benefits counsel for the U.S. Senate Finance Committee, discussed the impact the delay will cause. “There are a number of significant implications that will result from the one-year delay of the reporting requirements for insurance companies and employers and he employer mandate penalties,”he said.
Condelucci outlined the impact on both public and private exchanges:
"In the case of the exchanges, more employees will be eligible for a premium subsidy for health insurance in 2014. Why? There is no incentive for employers otherwise subject to the employer mandate to change their plan designs to satisfy the new requirements. This means that employees who would otherwise be considered 'full-time' (i.e., an employee that works on average 30 hours per week) will NOT be offered health insurance coverage. In addition, where an employer is offering coverage, there is little reason why an employer will make sure that its plan is “affordable” and/or provides 'minimum value.' In all of these cases – if the employee is eligible based on income – it is likely that these subsidy-eligible employees will (1) go to the Exchange, (2) purchase an individual market health plan, and (3) access the premium subsidy.
"In the case of 'web-based entities' or 'web-brokers' – which by definition are private exchanges – these entities will surely benefit from more individuals and families seeking to access the premium subsidies for health insurance by purchasing an individual market health plan through an ACA Exchange. In the case of 'group market' private exchanges, there may be an opportunity in 2015 for a private exchange to hold itself out as the answer for transitioning employees from an ACA Exchange health plan back on to an employer plan. How? It is more likely than not that an employer subject to the employer mandate will – in 2015 – change its plan designs to avoid the employer mandate penalty taxes."
This means that an employer will be offering an “affordable, minimum value” plan, which will cause the employee to lose eligibility for the premium subsidy, Condelucci added.
As a result, if an employee purchased an individual market health plan through the ACA Exchange and accessed the premium subsidy next year, by 2015, the employee will be forced back on to their employer plan and the “employee will no longer be eligible for the premium subsidy,” Condelucci observed.
News Region:
National
Keywords:
Individual mandate, ACA, healthcare reform, employers
